Monday, October 24, 2011

Sachs' "Mixed Economy"--A Middle Path

I am continuing to read Jeffrey Sachs’ The Price of Civilization.  It is like taking a crash course in modern economics.  Sachs’ discussion of the current political and cultural context of economics makes me think that the struggle is not between two opposing views of how to manage government within the context of our constitutional democracy.  Instead, I am beginning to think that the struggle is between democracy itself and a plutocracy in which a tiny minority of super-rich elites rule on the backs of an increasingly poor working class, buffered by a small professional class. 
To find a counterpart, I suspect we need to look back not to the Roaring Twenties or the Gilded Age of the Industrial period, but further to the landed aristocracy of the agrarian Middle Ages.  While that aristocracy was based on land—the proper form of wealth in an agrarian era—today’s aristocracy is based on market wealth, a wealth that manipulates markets rather than produce goods that improve the lives of people.   Just as the landed barons controlled the government of the Middle Ages, the corporate/finance barons are attempting to control democratic government today, rending it in the words of one presidential candidate, “inconsequential” and opening the door to direct corporate control.

Ultimately, I suspect, this is what the Occupy Wall Street demonstrators are really rallying against.  And, I further suspect, it is what concerned the Tea Party before they were taken over by the plutocrats.   At its most absolute, the fight, is not just to determine which political party will control government.  The fight is for idea of democracy itself.  

That said, it is absolutely essential that people not drift to extremes.  Neither a corporate plutocracy, in which government is inconsequential, nor a socialist government, in which the market is controlled centrally, are likely to produce long-term health for society.  What has proven to be successful—and which made the United States the most successful country in the world for most of the 20th century—according to Sachs is a mixed economy, in which corporations are generally free to produce goods and service and the government serves to do those things that are necessary for a happy life but that do not produce profit:  build roads and train systems, create levees and dams to control rivers and avoid floods, fund basic research that often has no immediate profit value.  And, I would add, regulate the activities of corporations only so that they do not work against the best interests of the population as a whole.

Ultimately, we need to focus not on the extremes, but on the balance—the mix, if you will—between these two aspects of a healthy democratic society.  Government and business are the Yin and Yang of a successful economy.  Together—as we found in the half-century between the Great Depression and the Reagan Revolution—they can create a wonderful society.  As we have seen elsewhere in the world, without that balance one gets failure at either extreme, whether it be the socialism of the USSR or the plutocratic oil dictatorships of the Middle East that are now being dismantled by the Arab Spring. 

Moderation, rather than extreme idealogy, is the key.  We need to reward politicians who have a long view and who are able to see the value of a diverse American “us.”


  1. I think there is more to it than just plutocracy. The rich have had disproportionate influence for a long time. The very low tax and government spending positions, in contrast, are rather new. I believe it is plutocracy plus a large but unspoken pessimism about America's future, to the point where it is better to "cash in one's chips" than to keep playing the game and invest in the future. The plutocracy should still be rational. We keep talking about the share of the wealth as opposed to the absolute wealth level. It's the latter that the plutocracy should want to maximize. With a more optimistic vision, they could do that by paying more taxes.

  2. Lanny,

    I agree that there is an incredibly deep negativity to all this. The plutocrats are particularly predatory at the moment, as if they could easily move on to another country once they have hollowed out our economy and culture. It is, as you suggest, irrational, but then most extreme ideologies are irrational.