Can Anything Good Come From the Crisis?
Paul Solman: In anticipation of the weekend, when I don’t get many questions from you folks to answer, I sometimes pose rhetorical questions. And because they come from me, I’m in a unique position to answer them. As is the case with this week’s query: Can anything good come from the crisis?
Good question. There are indeed several conceivable positives. In no particular order, they are that:
1) People tend to drink and smoke less in hard times, mainly because they can’t afford to. So it’s better for our collective health.
2) A global downturn is likely to mean a globe getting dirtier more slowly, especially with respect to greenhouse gas emissions. Thus, the crisis could buy us time to address global warming.
3) Our economy is likely to become more equal. The Republicans may have exaggerated the extent to which an Obama Administration might be “redistributionist,” since even a McCain presidency wasn’t liable to have let unemployment soar without increasing unemployment insurance, creating jobs, and so on. Still, Obama’s ending the proverbial Bush “tax breaks for the wealthy” would certainly help close the income gap all by itself.
But quite apart from redistribution, the huge drops in asset values have already had more impact on those with plenty of plenty than those with plenty of nothing, thus narrowing the wealth gap as well.
“Is this, however, necessarily a good thing for the economy?” one might ask. Even if you grant that, in terms of fairness, increasing inequality is clearly bad for those who are, in “Animal Farm” terms, less equal than others? (See our stories with British epidemiologist Dr. Michael Marmot for the relevant reasons and data on what inequality hurts.)
And if you don’t find Dr. Marmot’s data compelling, see what you think about the following:
-American CEOs earned 411 times as much as average workers in 2005, up from 107 times in 1990. (United for a Fair Economy, Executive Excess 2006, based on Business Week and the Wall Street Journal).
-Between 1949 and 1979, the inflation-adjusted average hourly wage for production workers rose 75 percent, from $9.00 to $15.78. Since 1979, the average production-worker wage has risen only two percent, from $15.78 to $16.11. (EPI, State of Working America 2006-07, Table 3.3)
Despite Marmot and this data, a popular economic argument — which has grown more popular in recent decades — is that inequality serves the greater good by giving greater economic incentives to the more productive among us; then the fruits of that increased labor will trickle down to the rest (pardon the fruits-can-trickle metaphor).
Recently we interviewed one of America’s true maverick economists and longtime students of inequality, Sam Bowles, professor at the University of Massachusetts and the University of Siena, Italy and the head of the Santa Fe Institute’s Behavioral Sciences program for a story on inequality in New Mexico (part of the NewsHour’s Spotlight Cities series).
We only used a small piece of the Bowles interview in our story. But I thought it was a fascinating case for the negative economic consequences of inequality and have thus posted a longer portion of the interview here, edited exclusively for the readers of this page. I hope you find it as provocative as I did.