The rich still run the US
America's traumatic recession should
have ushered in a wave of progressive
political reform. It hasn't happened
By Mark Weisbrot
Guardian (UK)
September 18, 2009
http://www.guardian.co.uk/commentisfree/cifamerica/2009/sep/17/healthcare-us-economy-reform
Corruption takes many forms in different countries and
locations. Here in the United States it may not be as
common to pay off a judge or a customs official as it
is in most low- and middle-income countries, but we do
have quite a bit of legalised bribery, especially in
the form of electoral campaign contributions. The most
obvious current case is that of healthcare reform,
where the powerful insurance, pharmaceutical and other
lobbies are in the process of vetoing some of the most
important parts of the healthcare reform that most
Americans want and need.
For example, the vast majority of Americans favour a
public option - insurance offered by the government, as
we have for senior citizens in the Medicare programme -
yet these powerful interests are blocking it in the
Senate. This is despite the modest nature of the
reform, which would not provide free or universal
insurance, but rather an additional option that
employers and individuals could buy into, with some
subsidies for those who could not afford it. The
insurance companies don't want competition, and the
pharmaceutical corporations don't want another
potentially large buyer that could bargain against
their own monopoly power over the prices of patented
drugs.
The United States is a rich country, so it seems
obvious that our forms of corruption are preferable to
those that plague developing countries. And they are,
in the sense that it that it is always better to be a
rich country and have rich country problems than to be
a poor or middle-income country. But if we look at the
US from the point of view of its potential - and I
don't mean utopian dreams but merely what is quite
feasible and practical in the immediate or near future
- it seems that we have a very limited form of
democracy.
One year after the collapse of Lehman Brothers and
nearly two years into our worst recession since the
Great Depression, we have almost nothing to show in the
way of reforms that could prevent a recurrence. The
financial sector is probably more concentrated than it
was before the crisis, and financial firms are still
gambling with taxpayer guarantees, and even subsidies.
Some are doing remarkably well - Goldman Sachs, a
recipient of billions of dollars of taxpayer
assistance, is expected to pay bonuses averaging
$700,000 each to 30,000 employees. The vastly over-
bloated financial industry that brought us this
calamity has shrunk by only 7.7% in terms of
employment, far fewer than the percentage of jobs lost
in manufacturing (14.6%) or construction (31.6%), since
the recession began.
One reform that many experts saw as necessary to avoid
future financial disasters was to regulate the trading
of derivatives - financial instruments that are based
on some other assets or values - so that they could be
traded and priced on an exchange like stocks, bonds or
commodities. Because many of these often complex
derivatives were traded outside of exchanges, financial
companies were able to hide enormous losses that only
showed up when things fell apart.
But off-exchange trading is a highly profitable
business - because when there are no market prices,
there is limited competition. So Wall Street is pushing
this modest but important reform off the table as well.
"Those on Wall Street cannot resume taking risks
without regard for consequences, and expect that next
time, American taxpayers will be there to break their
fall," Barack Obama announced Monday in a speech on
Wall Street. But so far, it looks like that's exactly
what they are doing.
What then are we to make of the prospects for reform
under an Obama administration and a Democratic
Congress? It is still relatively early in the game, but
one thing seems clear: This administration needs a lot
more pressure from the progressive end of the political
spectrum, especially the people who did the work and
made the contributions that elected this president.
Most of the pressure is coming from the right, which is
to be expected given the historic shift that the 2008
election represented. For nearly four decades the
politics of the country had been shifting rightward,
including during the Clinton administration. Most
importantly, the rules of the game have been steadily
rewritten in ways that shifted the distribution of
income upward.
The latest data that now takes us through the end of
the last business cycle (2002-2007) shows that two-
thirds of the income gains during these years went to
the top 1% of the income distribution. This brought the
income share of the top 1% to its highest level since
1928. The bottom 90% got only about 12% of the income
gains. This continued and accelerated a trend that
began in the mid 1970s, which was also quite pronounced
during the Clinton administration, when the top 1%
captured 43% of all income gains (as compared to just
11% in the 1960s).
The election of 2008 was a turning point, partly
because the recession and financial crisis forced swing
(mostly white, working-class) voters to focus on the
economic issues and see that they were getting hammered
under Republican rule.
The current recession will reverse that upward
redistribution temporarily, as happened in the last
recession, because a lot of wealth disappears. But
whether we get back on track toward a more equitable
society when the economy recovers will depend on
structural reforms. Healthcare is one such reform - and
the outcome is still undetermined - but we also need
reforms that more directly help the majority of
Americans to share in the gains from productivity
growth.
For this reason it is especially unfortunate that the
Obama administration has not fought for the Employee
Free Choice Act, which would make it easier for workers
to recover their lost ability to form unions in the US.
The most important provision in this act is known as
"card check", which would allow employees to form a
union as soon as a majority of them had signed cards
expressing their desire to join. This, too, is in the
process of being derailed.
Income distribution is fundamental, because it is
difficult to imagine social and economic progress in
most other areas, including democratisation, education,
poverty and social exclusion and crime as our society
grows increasingly unequal. It remains to be seen
whether we will see progress on this front when the
economy recovers.
c 2009 Guardian News and Media Limited
______________
Mark Weisbrot is Co-Director of the Center for Economic
and Policy Research (CEPR), in Washington, DC.
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