Rethinking economic policy: An upward spiral instead of a downward one

By Stan Sorscher, from the Huffington Post:

Stan Sorscher, EOI Board Member

When I was young, the purpose of public policy was to raise our standard of living. Not so much, anymore. Now, public policy is designed to make business succeed, or be “competitive.”

Our current policies are particularly well-crafted to the goal of making large multinational businesses succeed. Our policies benefit those businesses directly, while workers and small businesses make a leap of faith that boon will trickle our way. Corporate profits are at historic levels.

This has not raised our standard of living. Wages, adjusted for inflation, are stuck at 1975 levels, even though productivity has doubled in that time.

Years ago, public goals were inspiring. We believed in the promise of shared prosperity. We sent astronauts to the moon. Parents assumed their children would have opportunities to flourish economically and socially.

Now, public policy is all about a Lesser America, where we cling to whatever we have, invest little in our future, and irritably accept a shabbiness creeping over the country.

It’s not that hard to make big businesses succeed. They will succeed if we lower wages, cut pensions, shift medical costs to employees, grant tax subsidies, and pay for R&D with public resources. Multinational businesses will succeed by moving production offshore to pursue lower wages and relaxed environmental rules, or to ignore labor rights and human rights. Businesses will succeed, at least in the short term, if we let them forgo their share of investment in our education, public infrastructure, health care or affordable housing.

Policy-makers are trying. The stimulus was intended to “prime the pump,” as we used to say. Unfortunately, the pump leaks. To the extent that it works at all, our economic waterworks pump most of the jobs to low-wage countries. That won’t rebuild our economy.

Quantitative easing seems to be a heroic effort to reduce interest rates. That policy is completely unconnected to me, my family’s well-being, or the well-being of anyone I know. I’m sure the banks love it. After all, it was designed to help banks succeed. That won’t rebuild our economy, either.

It is worth noting that credit does not create new jobs. Demand creates new jobs. Businesses, large and small, will grow and hire when they have prosperous customers. It comes back to the question Henry Ford asked nearly a century ago — which would you rather have, low wages or prosperous customers?

Continued on Huffington Post

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