Dear Treasury Secretary Lew,
Thank-you for the invitation to meet with you to discuss solutions to the problem of economic inequality. It is wonderful that you are reaching out to economists to find new solutions to this pressing and challenging problem. I very much regret not being able to attend, and wanted to send you my thoughts and a suggestion.
As you know, and Thomas Piketty’s book Capital in the 21st Century shows, inequality has gotten much worse in the last half-century. The middle class is disappearing. A country of proud, industrious and entrepreneurial people is fast becoming a casino economy of gated communities, surrounded by a precariat of low wage workers and the unemployed. Our cherished democratic political process has been severely corrupted by the power of concentrated wealth, making it difficult for citizens to pass policies which would correct the situation.
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An indisputable strength of capitalism is its inherent capacity for technological innovation. When there is a problem in the operating system of a computer, the genius of capitalism soon solves it. However, it is my view, and that of a growing number of economists and social scientists, that we are confronting failures in the operating system of our economy, i.e. with the capitalist system itself. The obvious and reasonable response to systemic failure – the exploration of new ways, new systems – has been stymied. Capitalism is having difficulty birthing a successor economic system.
My profession has been implicated in this failure. As Einstein famously said, social problems cannot be solved by the type of thinking that created them. Economists have had difficulty thinking outside of the box, because of a gradual but severe narrowing of the discourse in the last forty years. Mainstream economics takes the capitalist system as given, and provides a detailed and useful operating manual. But other schools of economic thought, which are more social and historical in nature, and have more to say on the system question, have little voice, and are not looked to for solutions. Institutional economics, rooted in the work of Thornstein Veblen, and exemplified in the wisdom of John Kenneth Galbraith – economics professor at Harvard and ambassador to India in the 1900s – now receives little or no attention in the mathematics- and econometrics-centered world of 21st century US economists. Neoliberal “free market fundamentalist” discourse red-baits and silences Marxist and radical economists, whose central concern is the issue of inequality. It labels anyone who suggests an active role of government in creating basic economic human rights like health care a socialist, including the President. Yet the Dalai Lama’s recent pronouncement that he is a Marxist, because of his concern about class and the oppression of the poor, challenges us to open our eyes and minds and reject this knee jerk dismissal of a long and rich tradition of economic and social analysis.
So my proposal to you is simple. Stand up to those who will call you a socialist and claim that the only economic alternative to capitalism is Stalinist central planning. Create an Office of Economic Innovation to look into possible new economic systems, and reach out to heterodox economists and social scientists from other disciplines and other countries who are already studying these things. We have lots of new ideas to share and experiment with. The building blocks for a new economic operating system – new economic practices and institutions, and policies that support them – are already developing alongside capitalist ones, in the US and around the world. What we are finding is that these systems have in common a new and more evolved set of operating rules which humanize narrowly self-interested, materialistic, competitive “economic man,” into an economic agent who also values cooperation, social responsibility, equity, economic democracy, sustainability, and community. We even have words for these economies-in-the-making – the solidarity economy, the social economy, the new economy, sumak kawsay (which is in the Ecuadorian constitution!) – and a UN agency that is studying them.
Barack Obama built widespread public support on his commitment to the middle class and to economic and social justice. It is time for the Obama administration to take off its economic blinders, summon its courage and political will, and look into the future for a just and sustainable economic way forward. To affirm its belief that there can be a better way. Yes we can!
In peace and solidarity,
Professor of Economics, Wellesley College
Co-Founder and Boardmember, US Solidarity Economy Network