WHAT’S THE WHAT’S THE ECONOMY FOR, ECONOMY FOR,

ANYWAY?ANYWAY?

Part 1 of 3

Two Competing Views Two Competing Views of the Economyof the Economy

The Private Ownership Society

Vs.

The Public Good Society

• ““If you own something, you have a vital stake in If you own something, you have a vital stake in the future of our country. The more ownership the future of our country. The more ownership there is in America, the more vitality there is in there is in America, the more vitality there is in America, and the more people have a vital stake America, and the more people have a vital stake in the future of this country.” -- George W. Bush.in the future of this country.” -- George W. Bush.

• We need an “ownership society [in which] We need an “ownership society [in which] individuals are empowered by freeing them from individuals are empowered by freeing them from dependence on government handouts. . ., dependence on government handouts. . ., patients control their own health care, parents patients control their own health care, parents control their own children's education, and control their own children's education, and workers control their retirement savings.”workers control their retirement savings.” -- The -- The Cato InstituteCato Institute

The Logic of the The Logic of the Ownership SocietyOwnership Society

Criticisms of the Criticisms of the Ownership SocietyOwnership Society

• Some call it the “You’re on Your Ownership Some call it the “You’re on Your Ownership Society.” Others call it “The Risk Society.”Society.” Others call it “The Risk Society.”

• ““Before they can join the ‘Ownership Society’ Before they can join the ‘Ownership Society’ they…[Americans]…have got to pay their they…[Americans]…have got to pay their credit card bills, their rising variable-rate credit card bills, their rising variable-rate mortgages and their auto loans. After that, mortgages and their auto loans. After that, there’s no money left…” -- Robert Reichthere’s no money left…” -- Robert Reich

Criticisms of the Criticisms of the Ownership Society (cont)Ownership Society (cont)

The Logic of the The Logic of the Public Good SocietyPublic Good Society

Supporters of the public good society envision Supporters of the public good society envision an economic system that provides:an economic system that provides:

• Fair and Decent WagesFair and Decent Wages• Good HealthcareGood Healthcare• Affordable HousingAffordable Housing• Secure CommunitiesSecure Communities• Good EducationGood Education• Efficient and Clean TransportationEfficient and Clean Transportation• A Healthy EnvironmentA Healthy Environment• Time for FamilyTime for Family• Time for FriendsTime for Friends• Retirement Security Retirement Security

Criticisms of the Criticisms of the Public Good SocietyPublic Good Society

• ““The larger the slice taken by government, the The larger the slice taken by government, the smaller the cake available for everyone."” -- smaller the cake available for everyone."” -- Margaret ThatcherMargaret Thatcher

• ”… ”… And you know, there is no such thing as And you know, there is no such thing as society. There are individual men and women, society. There are individual men and women, and there are families. And no government can and there are families. And no government can do anything except through people, and people do anything except through people, and people must look to themselves first. It's our duty to must look to themselves first. It's our duty to look after ourselves…” -- Margaret Thatcherlook after ourselves…” -- Margaret Thatcher

• ““Government is not a solution to the problem, Government is not a solution to the problem, it is the problem.” -- Ronald Reaganit is the problem.” -- Ronald Reagan

Criticisms of the Criticisms of the Public Good Society (cont)Public Good Society (cont)

Evaluating Current Evaluating Current PoliciesPolicies

Before evaluating current policies Before evaluating current policies

we need to ask a fundamental we need to ask a fundamental question:question:

What’s the economy for, What’s the economy for, anyway?anyway?

The Conventional View The Conventional View of the Economyof the Economy

• The American economy's "ultimate purpose is to The American economy's "ultimate purpose is to produce more consumer goods." - Arthur F. Burns, produce more consumer goods." - Arthur F. Burns, Chairman of President Eisenhower's Council of Chairman of President Eisenhower's Council of Economic Advisors, 1953Economic Advisors, 1953

• "Our enormously productive economy demands that "Our enormously productive economy demands that we make consumption our way of life, that we convert we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek the buying and use of goods into rituals, that we seek our spiritual satisfaction and our ego satisfaction in our spiritual satisfaction and our ego satisfaction in consumption. We need things consumed, burned up, consumption. We need things consumed, burned up, worn out, replaced and discarded at an ever-worn out, replaced and discarded at an ever-increasing rate. - Victor Lebow, Retail Analyst, 1955increasing rate. - Victor Lebow, Retail Analyst, 1955

Conventional Measures of Conventional Measures of

Economic Well-BeingEconomic Well-Being

•The various stock market The various stock market averages averages

(DIJA, NASDAQ, S & P 500, etc.)(DIJA, NASDAQ, S & P 500, etc.)•Housing StartsHousing Starts•The Inflation RateThe Inflation Rate•The Unemployment RateThe Unemployment Rate•Consumer ConfidenceConsumer Confidence•Gross Domestic Product (GDP)Gross Domestic Product (GDP)•Gross Domestic Product (GDP)Gross Domestic Product (GDP)

The The World BankWorld Bank’s GDP ’s GDP Rankings (2006)Rankings (2006)U.S. Millions of DollarsU.S. Millions of Dollars

Rank Rank

1 United States (13,244,550) 11 Russia (979,048)

2 Japan (4,367,459) 12 India (886,867)

3 Germany (2,897,032) 13 South Korea (888,267)

4 China (2,630,113) 14 Mexico (840,012)

5 United Kingdom (2,373,685) 15 Australia (754,816)

6 France (2,231,631) 16 Netherlands (663,119)

7 Italy (1,852,585) 17 Turkey (392,590)

8 Canada (1,269,096) 18 Belgium (393,590)

9 Spain (1,225,750) 19 Sweden (385,293)

10 Brazil (1,067,706) 20 Switzerland (377,240)

Some US States Have Some US States Have Bigger GDPs Than Most Bigger GDPs Than Most

CountriesCountries

The IMF’s GDP The IMF’s GDP Per Capita Rankings (2006)Per Capita Rankings (2006)

Purchasing Power Parity (PPP)Purchasing Power Parity (PPP)Rank Rank

1 Luxembourg ($80,471) 11 United Kingdom ($35,051)

2 Ireland ($44,087) 12 Finland ($34,819)

3 Norway ($43,574) 13 Belgium ($34,478)

4 United States ($43,444) 14 Sweden ($34,409)

5 Iceland ($40,277) 15 Qatar ($33,049)

6 Switzerland ($37,369) 16 Australia ($32,938)

7 Denmark ($36,549) 17 Singapore ($32,867)

8 Austria ($36,031) 18 Japan ($32,647)

9 Canada ($35,494) 19 Germany ($31,095)

10 Netherlands ($35,078) 20 Italy ($30,732)

An Alternative View An Alternative View of the Economyof the Economy

• Gifford Pinchot was the first Gifford Pinchot was the first director of the US Forest Service director of the US Forest Service (1905-1910) and a Republican (1905-1910) and a Republican governor of Pennsylvania.governor of Pennsylvania.

• According to Pinchot, the According to Pinchot, the purpose of the economy is to purpose of the economy is to promotepromote

1)1) the greatest good the greatest good

2)2) for the greatest number for the greatest number

3)3) over the longest runover the longest run

How Might We Measure How Might We Measure the “Greatest Good”?the “Greatest Good”?

• WealthWealth• IncomeIncome• HealthHealth• Family LifeFamily Life• Community LifeCommunity Life• Security/SafetySecurity/Safety• EducationEducation• Life SatisfactionLife Satisfaction• FreedomFreedom• Etc.Etc.

How Might We Measure How Might We Measure the “Greatest Number”?the “Greatest Number”?

• Gap Between Rich Gap Between Rich & Poor& Poor

• Poverty RatePoverty Rate

• Social MobilitySocial Mobility

• Access to Health Access to Health CareCare

• Access to Access to EducationEducation

• Etc.Etc.

How Might We Measure How Might We Measure the “Longest Run”?the “Longest Run”?

• National debtNational debt

• Personal savings ratePersonal savings rate

• Pension securityPension security

• Health securityHealth security

• Environmental Environmental sustainabilitysustainability

• Etc.Etc.

Time Series of theTime Series of the U.S. Personal Savings RateU.S. Personal Savings Rate

Time Series of theTime Series of the U.S. Personal Savings RateU.S. Personal Savings Rate

Americans now have a net personal savings rate of -1%, lower than

any European country except Greece!!!

Please Continue with Part 2: Please Continue with Part 2: What’s the Economy for, What’s the Economy for,

Anyway?Anyway?