Even The Media Asks: Is The System Failing?

Wow. Is This The End of Market Democracy? (New York Times):

While Americans are going to be able to choose between two contrasting ideologies, what if both choices are off the mark? What if the legitimacy of free market capitalism in America is facing fundamental challenges that the candidates and their parties are not addressing?

Here are some of the issues that are making some politicians and political thinkers uneasy:

• Are large segments of the American workforce — millions of people — at a structural disadvantage in the face of global competition, technological advance and ever more sophisticated forms of automation? Is this situation permanent? 

• Will the share of profits from improving corporate productivity flowing to capital and to high-earning C.E.O.s continue to grow, while the income of wage earners stagnates and their share of profits declines? 

• Has the surging wealth and income of the top one percent and of the top 0.1 percent reached a tipping point at which the political leverage of the very affluent decisively outweighs the influence of the electorate at large? 

• Is it possible that in the United States and Europe, democratic free market capitalism is no longer capable of providing broadly shared benefits to a solid majority of workers?

Answers: yes, yes, yes, and almost certainly yes.One quibble - it's not very democratic, is it?
{snip}

In a paper published by the Council on Foreign Relations, Spence and co-author Sandile Hlatshwayo argue that the employment problems of the United States do not result from market failure. Just the opposite: the problems arise from an exceptionally efficient global marketplace. Instead of benefiting from the market, many in the United States, particularly those holding mid-level skill jobs that can be performed at lower cost overseas, are paying the costs of efficiency — the victims, in effect, of creative destruction.

Multinational companies, Spence and Hlatshwayo write, “are doing exactly what one would expect them to do. The resulting efficiency of the global system is high and rising. So, there is no market failure.” In the postwar period from 1946 to the mid-1970s, the United States benefited enormously from globalization, which opened new markets for American products.

“We now appear to be at a crossroads,” Spence and Hlatshwayo contend:

as emerging economies of less developed nations begin to produce goods at lower cost and often of higher quality than American-made goods. Many of those effects are positive. Consumer goods, for example, are less expensive than they would be in a less open environment. But the distributional effects may be negative. Within countries, inequality may rise. Between countries, the success of the emerging economies may impose costs on richer ones.

Fukuyama, in an provocatively titled essay — “The Future of History: Can Liberal Democracy Survive the Decline of the Middle Class?” — which appeared in a recent issue of Foreign Affairs, warns that

the benefits of the most recent waves of technological innovation have accrued disproportionately to the most talented and well-educated members of society. This phenomenon helped cause the massive growth of inequality in the United States over the past generation.

{ Talented and well-educated? Like Paris Hilton? What he means is, those born with the right advantages. Even  while criticizing the system he's propagating its myths. }

Fukuyama’s conclusion is pessimistic:

There are a lot of reasons to think that inequality will continue to worsen. The current concentration of wealth in the United States has already become self-reinforcing: as the economist Simon Johnson has argued, the financial sector has used its lobbying clout to avoid more onerous forms of regulation. Schools for the well-off are better than ever; those for everyone else continue to deteriorate. Elites in all societies use their superior access to the political system to protect their interests, absent a countervailing democratic mobilization to rectify the situation. American elites are no exception to the rule.

I was listening to a podcast with Jeffrey Sachs today, and it strikes me that more and more of the best and the brightest realize that our system is failing. We think of economists, for example, as high priests of the religion of capitalism (indeed, I've said so myself). But many of the world's most renowned economists - Sachs, Paul Krugman, Joseph Stiglitz, Nouriel Roubini, Ken Rogoff, Nassim Taleb, and many others, are warning that the system has to evolve. Even libertarian economists like Tyler Cowen publish books like The Great Stagnation. They are criticizing the system from a Burkean conservative position - slow, incremental change, not too fast, but they are odds with what is today labelled as "conservative". Remember, Burke himself was never against any sort of change regardless of circumstance.

The resistance to change is coming more and more from reactionary political movements that demonize intellectuals of all stripes and even reject the conclusions of science. The backers of these movements are typically large wealthy corporations and bankers. They have no motivation besides self-interest, they do not care if the whole world disintegrates so long as they can keep their gains. Intellectuals, on the other hand, at least theoretically care whether the system works, and it's becoming more and more clear that it doesn't. Even in their ivory towers, they can no longer ignore the political corruption, increasing poverty, failing schools, overflowing prisons, crumbling infrastructure, tent cities, divisive politics, street protests, environmental destruction, and all the other signs that globalized corporate capitalism is failing as surely as Communism did thirty years ago.