The Next Progressive EraThe Next Progressive Era

Book Talk, Washington University in St. LouisBook Talk, Washington University in St. Louis

January 27, 2010January 27, 2010

Phil Longman & Ray BosharaPhil Longman & Ray Boshara

New America FoundationNew America Foundation

www.newamerica.netwww.newamerica.net

202-986-2700202-986-2700

Let me describe an era to you...Let me describe an era to you...

Rapid technological changeRapid technological change Stunning advances in scienceStunning advances in science Rising fundamentalismRising fundamentalism Gaping inequalityGaping inequality Double-digit unemploymentDouble-digit unemployment Networks of violent non-state Networks of violent non-state

actorsactors Parents fretting over the Parents fretting over the

quality and safety of foodquality and safety of food A health care system in crisisA health care system in crisis Massive consolidation among Massive consolidation among

corporationscorporations

A new era of infectious A new era of infectious diseasedisease

New mediums spreading New mediums spreading violent and obscene imagesviolent and obscene images

Well organized lobby on Well organized lobby on behalf of spending on the behalf of spending on the elderlyelderly

Widespread, nefarious lending Widespread, nefarious lending practices and rising debt practices and rising debt levels among the middle classlevels among the middle class

Development of massive, Development of massive, lower-cost energy sources, lower-cost energy sources, and mounting concerns about and mounting concerns about the environment.the environment.

Sound familiar? Progressive Sound familiar? Progressive Era – about a 30 year period Era – about a 30 year period beginning in the deep beginning in the deep recession of the early 1890s.recession of the early 1890s.

Now let me tell you some of what they achievedNow let me tell you some of what they achieved…… Seriously reduced the role of Seriously reduced the role of

money in politicsmoney in politics Reformed the health care Reformed the health care

systemsystem Dramatically reduced rates of Dramatically reduced rates of

infectious diseaseinfectious disease Tamed the drug industryTamed the drug industry Created a regulatory regime for Created a regulatory regime for

Wall Street and the banking Wall Street and the banking sector that prevented any need sector that prevented any need for massive taxpayer bailoutsfor massive taxpayer bailouts

This included the Federal This included the Federal Reserve Act, one of the most Reserve Act, one of the most enduring of all Progressive enduring of all Progressive reformsreforms

Stopped predatory lendingStopped predatory lending Enacted the Pure Food & Drug Enacted the Pure Food & Drug

Act, and the consumer safety Act, and the consumer safety movement.movement.

Instituted the federal, Instituted the federal, progressive income tax systemprogressive income tax system

Forestalled the growth of Forestalled the growth of terrorism and rationalized terrorism and rationalized immigrationimmigration

Engineered a massive Engineered a massive conversion to cleaner, cheaper conversion to cleaner, cheaper energyenergy

Restored public trust in Restored public trust in governmentgovernment

Ended child labor, gave women Ended child labor, gave women the right to votethe right to vote

Revamped public schoolsRevamped public schools Installed an ethic of thrift, Installed an ethic of thrift,

conservation and public service conservation and public service Universalized high school Universalized high school

educationeducation Left no legacy of public debtLeft no legacy of public debt Launched the social work Launched the social work

profession through Jane profession through Jane Addams, Ellen Gates Starr, Hull Addams, Ellen Gates Starr, Hull HousesHouses

Our MomentOur Moment Not an apologist for the Era, and clearly some of their moral reforms – like prohibition Not an apologist for the Era, and clearly some of their moral reforms – like prohibition

– overreached. And some of their public health accomplishments led to the – overreached. And some of their public health accomplishments led to the commercialization of medicine, which we’re still suffering from today.commercialization of medicine, which we’re still suffering from today.

But our economic, social, cultural, demographic, and environmental conditions are But our economic, social, cultural, demographic, and environmental conditions are similar – but could we achieve what they’ve achieved? At the very least, what could similar – but could we achieve what they’ve achieved? At the very least, what could we learn from them?we learn from them?

Mark Twain is said to have observed that history does not repeat itself, but it often Mark Twain is said to have observed that history does not repeat itself, but it often rhymes. Let’s hope so.rhymes. Let’s hope so.

I begin this way to demonstrate we are undergoing a once-in-a-century I begin this way to demonstrate we are undergoing a once-in-a-century transformation that holds great peril but offers equally tantalizing – and achievable -- transformation that holds great peril but offers equally tantalizing – and achievable -- opportunity for reforms, to usher in what Phil Longman, and I call opportunity for reforms, to usher in what Phil Longman, and I call The Next The Next Progressive Era.Progressive Era.

This is the time to think big, to rewrite the rules of engagement, to re-make many of This is the time to think big, to rewrite the rules of engagement, to re-make many of the core elements of our social contract – the “deal” between citizens, employers, the core elements of our social contract – the “deal” between citizens, employers, non-profits, and government. non-profits, and government.

Following the Scott Brown election, lagging process on health care reform, energy, Following the Scott Brown election, lagging process on health care reform, energy, climate change, the housing market, reducing the deficit and debt and, of course, climate change, the housing market, reducing the deficit and debt and, of course, restarting the economy, many say those hopes have been dashed. restarting the economy, many say those hopes have been dashed.

We’re all humbled by this –but not without hope. Phil and I come with a new vision, We’re all humbled by this –but not without hope. Phil and I come with a new vision, new themes, and new policy ideas for a progressive era. new themes, and new policy ideas for a progressive era.

The Next Progressive Era, The Next Social Contract?The Next Progressive Era, The Next Social Contract?

Our economic, social, cultural, demographic, and environmental conditions Our economic, social, cultural, demographic, and environmental conditions are similar - but could we achieve what they achieved? At the very least, are similar - but could we achieve what they achieved? At the very least, what could we learn from them?what could we learn from them?

Once-in-a-century transformation, promise and peril - Once-in-a-century transformation, promise and peril - The Next Progressive The Next Progressive Era?Era?

Mark Twain is said to have observed that history does not repeat itself, but Mark Twain is said to have observed that history does not repeat itself, but it often rhymes.it often rhymes.

Hegel: “The Owl of Minerva flies only at dusk.” We can understand an era Hegel: “The Owl of Minerva flies only at dusk.” We can understand an era only at the end of it.only at the end of it.

America’s social contract up for negotiation, always following an era of America’s social contract up for negotiation, always following an era of stunning industrial, technological, and demographic change. Three major stunning industrial, technological, and demographic change. Three major social contracts so far-social contracts so far-

First – followed founding of republic, small-scale owners, yeoman farmers First – followed founding of republic, small-scale owners, yeoman farmers Second – followed 1Second – followed 1stst industrial revolution, led to Progressive Era industrial revolution, led to Progressive Era Third – followed 2Third – followed 2ndnd industrial revolution, led to New Deal industrial revolution, led to New Deal Fourth – what social contract follows the 3Fourth – what social contract follows the 3rdrd industrial revolution?? industrial revolution??

In other words, we’re still living with the social contract established in the In other words, we’re still living with the social contract established in the 1930s – a monumental achievement, but one that no longer reflects the 1930s – a monumental achievement, but one that no longer reflects the globalized, information-rich, flexible, and mobile world in which we live.globalized, information-rich, flexible, and mobile world in which we live.

What do I mean by “Progressive”?

The term has changed much over time• 1912 election – Republican William Taft, Democrat Woodrow Wilson,

Progressive “Bull Mouse” Party candidate Teddy Roosevelt all competed to be the best progressive. Wilson, of course, prevailed.

• Can you imagine Glenn Beck, or Sarah Palin today calling themselves a progressive?

• Many liberals or Democrats claim to be progressive, but it means many things, a confused term, and for many, not a positive one.

Original vision: Back then it was meant to protect a way of life – the independent producer, the owner, the business man, the “yeoman” farmer, and the community from forces beyond one’s control. That word dropped out of national lexicon when, in the 30s, the consumer became the ideal America – an era that is coming to an end.

Today: A government that promotes opportunity, financial independence, strong families and communities, and a fair playing field. Larger economic and corporate forces need to be restrained and regulated to keep the playing field fair so that families and communities have a fair shot at economic independence.

Not big or small government – whatever size is necessary to realize this vision.

Current RecessionCurrent Recession Must understand causes of recession to Must understand causes of recession to

better understand our proposed solutions, better understand our proposed solutions, which center around two unifying themes which center around two unifying themes of the progressive era – thrift, and of the progressive era – thrift, and yeomanry.yeomanry.

Our situation is actually closer to the Our situation is actually closer to the challenges faced by Progressive Era challenges faced by Progressive Era reformer than those faced by the New reformer than those faced by the New Dealers. Dealers.

The Great Depression of the 1930s was The Great Depression of the 1930s was caused by lack of effective consumer caused by lack of effective consumer demand. demand.

The next Great Depression – if it comes to The next Great Depression – if it comes to that – will have been caused by a that – will have been caused by a consumer driven economy that eventually consumer driven economy that eventually exhausted its ability to borrow. exhausted its ability to borrow.

American consumption makes up a American consumption makes up a stunning 70% of the U.S. economy and stunning 70% of the U.S. economy and 25% of the worlds. We’re largely financed 25% of the worlds. We’re largely financed that consumption through debt.that consumption through debt.

It’s important to understand that it’s not It’s important to understand that it’s not conspicuous consumption that driving this conspicuous consumption that driving this debt – it’s overwhelmingly necessities, the debt – it’s overwhelmingly necessities, the cost of living a basic American middle class cost of living a basic American middle class life. (Warren)life. (Warren)

But just as families needed to rely more But just as families needed to rely more and more on debt to meet their basic and more on debt to meet their basic needs, “financial crack” hit the streets needs, “financial crack” hit the streets

No one heard, or everyone at least No one heard, or everyone at least ignored, this ticking-time bomb as long ignored, this ticking-time bomb as long as home and other asset values were as home and other asset values were rising. rising.

So debt levels rose to dangerous and, So debt levels rose to dangerous and, ultimately, unsustainable levels: ultimately, unsustainable levels: Household debt as a percentage of Household debt as a percentage of disposable income rose from 90% in the disposable income rose from 90% in the 1990s to 133% in 2007.1990s to 133% in 2007.

Households, and the economy, simply Households, and the economy, simply could not absorb anymore debt – the cup could not absorb anymore debt – the cup overflowed, the bubble burst – pick your overflowed, the bubble burst – pick your metaphor. metaphor.

Consumption slowed, adjustable rate Consumption slowed, adjustable rate mortgages kicked-in, people starting mortgages kicked-in, people starting defaulting on their home and consumer defaulting on their home and consumer loans, banks got nervous about the loans, banks got nervous about the underlying value of their assets, credit underlying value of their assets, credit got tight, making spending and got tight, making spending and investment even harder, which further investment even harder, which further suppressed consumption, and on and on, suppressed consumption, and on and on, and we now found ourselves in the mess and we now found ourselves in the mess we’re in.we’re in.

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What Replaces the American Consumer?What Replaces the American Consumer?(Economic Growth Program, New America Foundation(Economic Growth Program, New America Foundation))

The President has The President has acknowledged that the acknowledged that the American consumer can no American consumer can no longer be the engine of longer be the engine of economic growth. But what, economic growth. But what, then, is?then, is?

Nothing will. We just need to Nothing will. We just need to prepare ourselves for prepare ourselves for something like Japan’s lost something like Japan’s lost decade, long years of sub-par decade, long years of sub-par growth. This may well growth. This may well happen. Tom Friedmanhappen. Tom Friedman

Emerging markets, especially Emerging markets, especially China, will. Pent up demand in China, will. Pent up demand in China and elsewhere will China and elsewhere will stimulate global demand and stimulate global demand and reduce America’s trade deficit reduce America’s trade deficit in the process.in the process.

A third answer is the green A third answer is the green economy: A new public economy: A new public consensus about global climate consensus about global climate change and about the national change and about the national security risks of relying on security risks of relying on imported oil will create an imported oil will create an investment boom in low-carbon investment boom in low-carbon energy sources and in clean energy sources and in clean energy technologies in both the energy technologies in both the U.S. and world markets. U.S. and world markets.

A final answer is that a new A final answer is that a new government commitment to government commitment to rising wages and increased rising wages and increased public investment, including public investment, including new investments in health care new investments in health care and education as well as public and education as well as public infrastructure, will not only help infrastructure, will not only help restore consumer purchasing restore consumer purchasing power but change the power but change the composition of U.S. consumer to composition of U.S. consumer to make it both more sustainable make it both more sustainable and socially healthy.and socially healthy.

Thrift and YeomanryThrift and Yeomanry

Hopefully it’s not nothing, Hopefully it’s not nothing, but some combination of the but some combination of the other three.other three.

But, in our view, a couple of But, in our view, a couple of complementary themes complementary themes should guide a broad range should guide a broad range of policies going forward:of policies going forward:

• Two themes central to Two themes central to the Progressive Erathe Progressive Era

• Old and musty todayOld and musty today• But perfect antidotes to But perfect antidotes to

households overloaded households overloaded with debtwith debt

• And a nation in search of And a nation in search of new modes of growth new modes of growth and job creation.and job creation.

Thrift (Ray – see next slide)Thrift (Ray – see next slide)

Yeomanry (Phil) – Yeomanry (Phil) – • Small scale production and Small scale production and

ownership – a producer ownership – a producer society.society.

• Job creation Job creation • Modern monopolies Modern monopolies • Pivot to some of the Pivot to some of the

political considerations in political considerations in moving our ideas forwardmoving our ideas forward

Thrift – thenThrift – then Images of thrift todayImages of thrift today

• Comeback, but mostly negativeComeback, but mostly negative• Good for households, bad for Good for households, bad for

the economy (Keynes, Paradox)the economy (Keynes, Paradox)• Sofas, baggies, Green StampsSofas, baggies, Green Stamps

Reality of thrift thenReality of thrift then• Life, hope, point of progress. Life, hope, point of progress.

“Wise use,” conservation, “Wise use,” conservation, stewardship.stewardship.

• Not just money – health, Not just money – health, energy, food, diet, natural energy, food, diet, natural resources, even one’s time.resources, even one’s time.

• Ben Franklin – secret of success Ben Franklin – secret of success -- but, for progressive, not just a -- but, for progressive, not just a personal virtue but a deeper, personal virtue but a deeper, moral meaning – an obligation moral meaning – an obligation to conserve all resources for to conserve all resources for future generations.future generations.

Wilson: “We are in this world not to Wilson: “We are in this world not to provide for ourselves alone, but for provide for ourselves alone, but for others, and that is the basis of others, and that is the basis of economy—so that thrift and economy—so that thrift and economy and everything that economy and everything that administers to thrift and economy, administers to thrift and economy, supply the foundation of our supply the foundation of our national life.”national life.”

Environmental accomplishments:Environmental accomplishments:Conservation of natural resources Conservation of natural resources added massive areas to the national added massive areas to the national forests (total of 190 million acres) and forests (total of 190 million acres) and to our nation’s first zoning laws.to our nation’s first zoning laws.Invented recycling (in the first World Invented recycling (in the first World War)War)

Financial sector accomplishments:Financial sector accomplishments:To battle salary lenders, bank the To battle salary lenders, bank the unbanked, provide financial services unbanked, provide financial services for the common man, thrifts and credit for the common man, thrifts and credit unions came into being (Edward Filene, unions came into being (Edward Filene, MA 1909)MA 1909)Uniform Small Lending Acts 1911-1915 Uniform Small Lending Acts 1911-1915 in various states to cap interest rates at in various states to cap interest rates at 36% -- on the books till late 70s-80s, 36% -- on the books till late 70s-80s, hope to return to todayhope to return to todayImmigrant banks, school banking, Immigrant banks, school banking, financial educationfinancial education

Health accomplishments:Health accomplishments:Thrift in health –Trimmers clubs, Camp Thrift in health –Trimmers clubs, Camp Fire Girls. used CCTs. Fire Girls. used CCTs. Thrift in health contributed to Thrift in health contributed to Temperance movement – at personal Temperance movement – at personal level, and ag. Production (corn, barley, level, and ag. Production (corn, barley, sugar). 18sugar). 18th amend, 1919th amend, 1919). Ethanol today?). Ethanol today?

Thrift – going forwardThrift – going forward

Recession – thrift and savings Recession – thrift and savings making a comeback, but it is making a comeback, but it is a fad?a fad?

We’re all Keynesians now We’re all Keynesians now (Nixon), and have been for (Nixon), and have been for three generations.three generations.

Yet thrift unites our growing Yet thrift unites our growing concerns about obesity, concerns about obesity, chronic disease, debt, chronic disease, debt, inequality, climate change, inequality, climate change, energy efficiency, threatened energy efficiency, threatened species, children…species, children…

Thrift, with Yeomanry, also Thrift, with Yeomanry, also captures our necessity to captures our necessity to generate household and generate household and national savings – Obama national savings – Obama “save and invest’ economy, “save and invest’ economy, Secretary Geithner (“different Secretary Geithner (“different kind of recovery – “we’ll need kind of recovery – “we’ll need to save more”), and this to save more”), and this week’s Middle Class report week’s Middle Class report from Obama Admin. from Obama Admin.

And thrift, with Yeomanry, And thrift, with Yeomanry, captures our necessity to captures our necessity to broaden asset ownership, broaden asset ownership, what we call “asset building” what we call “asset building” today!today!

A unifying framework helped A unifying framework helped then, and it could today.then, and it could today.

Five New Ideas For a New Social ContractJob creation, yes, especially in those sectors where employment is likely to grow – healthcare, education and local public services But job creation alone is not enough to thrive in the 21st century economy. Let us:

1. Develop producers, not just consumers. Can we be defined by what we produce, not by just we consume? By what we give, not by just we take?

2. Build assets, not just income. Property ownership is a long tradition is the U.S. Once dominant, now recessive gene in our DNA. Assets are key to participating in 21st century economy.

3. Create entrepreneurs, not just employees. Entrepreneurs are of course the engine of job creation. We ended the decade from 2000-2009 with zero net job creation because we didn’t create enough new jobs.

4. Promote thrift – in the broadest possible sense, a new ethic of conservation applied broadly.

5. Build institutions, not just lives. One of the reasons Progressive Era reforms were successful and endured is because they built institutions.