Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 28, 1993 TAG: 9303010212
SECTION: EDITORIAL PAGE: F-3 EDITION: METRO
SOURCE: T. RICHARD YOUNG
DATELINE: LENGTH: Long
BILL CLINTON IN A POST-MODERN WORLD
PRESIDENT Clinton has set forth a complex economic package designed to take the United States well into the 21st century.For the past 50 years, governments have used a weak version of Keynesian economics to stimulate a declining economy. Money is pumped into the economy in bad times and taken out in good times.
Pumping money into the economy involves a number of fiscal tools, including subsidies, public-sector jobs, decreased taxes and lower interest rates. The money is raised by borrowing.
In good times, national debt is repaid by taxes, tariffs, fees and tolls. This policy is supposed to smooth out the ups and downs of a capitalist economy. John Maynard Keynes has towns and universities named after him in England for this simple bit of fiscal wizardry. Richard Nixon said, in 1972, that we are all Keynesians now . . . all except liberal Republicans.
Liberal Republican economic philosophy is grounded upon social Darwinism: Hands off the economy. They think a free market works better than one controlled by rank amateurs or interest groups. They assume the ups and downs of the economy are a pruning shears that will eliminate inefficient producers and move resources where the market demands.
Conservative Republicans tend to agree, but want some markets controlled or closed: abortion, pornography, prostitution and drugs to start with, and a tight rein on some ideas as well. Ideas that challenge established views about religion, economics, evolution and education are to be excluded from the market.
In the liberal Republican version, the free market is without constraint; in the conservative version, the market is constrained by conservative religious values.
I tend to agree with economic conservatives: Economics should always be enveloped in a wide-ranging religious sensibility. I tend to agree with economic liberals who want to retain the many positivities of market dynamics. However, I disagree with the ways in which market dynamics are to be constrained by religious sensibility.
Both liberal and conservative Republicans depend upon parallel economic systems to respond to religious sensibility. Foremost is the family. The family is to redistribute wealth on the basis of need, not the government. Parallel to the family are a wide assortment of private charities, voluntary organizations, and neighborly donations to help those in need.
Such parallel systems are instances of a drama of the holy, which encloses economics within religion. However, the boundaries of the holy are often very narrow, leaving out millions of people who are unconnected to families with discretionary income or to neighbors with compassion. Such localized dramas of the holy are inadequate in a complex society torn by class conflict, racist preference, ethnic privilege and the feminization of poverty.
Liberal Democrats tend to locate such parallel economic systems in the state sector, since doing so responds in a more systematic way than family, church and city can. But they construct a mindless and cumbersome, often corrupt, machine with which to respond to need.
Liberal Republican economic policy does work. If we are willing to tolerate massive depressions about every 50 years, the many advantages of a free market are ours.
There are costs: Businesses fail, corporate crime increases, street crime increases, families fall apart, populations migrate and the center of capitalism shifts to another part of the world. Over the past 700 years, we have seen the center of capitalism shift from Venice to Brussels to London to New York and now to Tokyo.
If profit is our key parameter, it makes sense to move capital, jobs and factories to where costs are lower and profits higher. Such moves cause turmoil, but Darwinians appear to be right: Left alone, the free market delivers wealth unknown in any other economic system. But it also produces great inequalities in wealth. The United States has the greatest wealth and the greatest inequality of any country in history.
There is another cost to a really free market. If we strip the mines, the forests, the fields and the mountains to get the raw materials with which to produce ever more, the integrity of the environment is degraded. If we manufacture more and more, we produce more and more waste. Profit considerations make it sensible to dump the wastes rather than treat it or use it. When freed to pollute, capitalism pollutes.
Keynesian economics would work if the economy worked like a classical hydraulic system; it doesn't. Economies exhibit nonlinear dynamics: There are sudden changes with small increases in taxes, spending or competition.
Keynesian economics would work if the American economy were unconnected to the global economy; it isn't. Decisions made in Tokyo, Berlin, Riyadh or London affect the key economic variables in the United States.
Small changes in external markets can trigger large effects in the American economy. In the new economics of complexity, one needs to know which are the key parameters that drive an economy, which are close to a dramatic change point, and what kind of nonlinear response is best. With that knowledge, a very light nudge, if made at the right time and the right place, could prevent or foster economic change.
It takes global economic policy to manage economic crises in a globalized economy. But global policy won't work unless the basic research capacity is in place to give us the kind of knowledge we need. It isn't.
Aspects of Clinton's plan sit very nicely within the new science of complexity, called "chaos theory." And it sits within the context of a post-modern religious sensibility that sees America as a community rather than a mass of disconnected competitors.
First of all, it focuses upon key parameters: jobs, job training, and rebuilding a neglected infrastructure. Capitalism won't work without labor and capital goods.
Another key parameter is debt. Liberal Republicans joined with conservatives to spend money and lower taxes in good times, rather than in bad times as Keynesians suggest. We now spend 10 percent of our taxes on debt; by the year 2000, we will be spending 20 percent.
Such a large change in federal spending will mean small and possibly critical changes in programs that a free market will not touch: child care, medical services for the poor, crime control, public highways and such. Clinton is right: If we don't maintain every part of the economic machine, sooner or later it will break down.
Jobs for young people are essential. Crime, teen pregnancy and racist animosity all thrive in a society that discards half or more of its children. One's religious sensibility has to expand to include children not directly related to one.
An energy tax is sensible if we want to encourage alternative energy systems, reduce pollution and pay back the money borrowed by the Reagan-Bush government. The problem is that it is regressive. Higher minimum wages, family allowances, tax credits and energy-efficient cars all would address the inequity of regressive taxes.
Taxing those who benefit most from the workings of economic policy of the past 12 years makes sense.
In terms of equity, 10 percent of $100,000 dollars seems like more than 10 percent of $30,000 but it isn't. It is far less, since dollars have marginal utility for rich and poor alike. In terms of justice and political legitimacy, letting those who benefit most pay most is just.
Of every $10 paid out by the federal government, $9 goes to the wealthy. Most of the billions paid out to cover the savings-and-loan scandal went to the wealthy. Most of Social Security payments go to middle- and upper-class senior citizens; the poor do not live long enough nor earn enough to take much from Social Security.
Medicare is the one program biased in favor of the poor, since they have more medical problems and postpone treatment longer.
Spending cuts hurt; since most would hit special-interest groups well-connected to Congress and to federal agencies, they will be difficult to make. Most make sense, especially in health-care policy, for which Americans spend more and get less than any other country in the world. That's good for doctors, not for nurses; good for owners of hospital and pharmacy stock but not for poor patients; good for insurance companies and administrators, not for poor children and the underinsured.
Taken as a whole, the Clinton program offers the best available package with which to manage the many uncertainties of an unstable economy. If the Clinton team stays flexible, stays reasonable, uses a gentle touch and works on an international scale to secure an equitable global economy, it can do much to ensure the prosperity, the domestic tranquility and the sense of community embodied in the American Constitution.
T. Richard Young is senior distinguished visiting professor of sociology at Virginia Tech.