The Other I

June 29, 2017

Questions if not answers

My post ten days ago “I missed something big” has generated a number of online comments and even more to me personally.  It’s stimulated my thinking enough to provide another post.  So for what it’s worth —

I think I will stop using the word “socialism.”  Its meaning is too varied, stretching from various forms of Communism to simply a concern for the poor, in whatever way the problem may be addressed.

Nonetheless, the economic question being discussed does seem to revolve around how problems of injustice, unfairness, and gross inequality should be addressed.  There are those like Karl Marx and John Maynard Keynes who offered different solutions, but both believed that the essential solution lay with government policy.  Marx, of course, developed Communist theory.  Keynes, on the other hand, believed that in times of depression, governments should shoulder significant debt in order to create jobs and thus stimulate the economy.

This theory was given a credence by the fact that military spending during the Second World War ended the depression in the United States and after the war, set in motion decades of growth and programs such as social security to provide pensions for the retired who no longer could earn a living by working.

But excessive government spending, unfortunately, does not always create better fortune for the many.

  • Corruption is a frequent crippling drain as is clear today in governments in Latin America, Africa, and elsewhere.
  • But corruption is not the only problem.  Governments can’t always sustain the debt they incur, and once again, people are plunged into life-threatening poverty.  The dramatic drop in the price of oil has been extremely destructive for governments which have been dependent on oil.  Venezuela today is an outstanding, if not sole, example.
  • Finally, there is the call, made by Jeremy Corbyn, leader of the Labour party in the UK today, to tax the rich to increase the minimum wage, and relieve poverty by providing government subsidies for university tuition, child care, parental leave, and more social care for the elderly and disabled.  Unfortunately, as the world becomes increasingly globalized, this taxing the rich policy must be applied very carefully.  When it was tried in Britain in the 1970’s, it led to a “brain drain” out of the country, and the economy faltered so badly that it needed help from the IMF.

The alternative to government spending which is particularly popular in the United States under the Republicans is to lower, rather than raise, taxes for the rich.  The theory is that it is the rich who generate jobs through the companies they manage, the people they hire to meet personal needs, in other words, through the money they make and spend.  And in some cases this seems to be true.

But like increased government spending, this approach does not always work in practice exactly the way it does in theory.

  • For one thing, the rich save a much larger proportion of their money than do the less well off.  In other words, much of their money does not generate jobs — except possibly for bankers.   It is not necessarily the rich who have “made America great.”   Many of the most productive companies in the US employing tens of thousands of Americans today were founded by immigrants who came to the U.S. with nothing but a willingness to work and a creative energy.
  • Thomas Piketty, who has had the chance to analyze several centuries of data, shows that capitalism is not intrinsically a system which rewards hard work and talent.  It frequently develops in such a way as to build in greater rewards for those who already are better off and to reduce the welfare of those who aren’t.  The effects of this reality have been substantial in the United States where the difference between the top 10% of the population and the workers has increased dramatically in the last 3 decades, gutting the middle classes and increasing serious levels of poverty.

The differences between these two approaches, as we have seen, is infused with a strong sense of  Right and Wrong, and so often becomes not only heatedly political, but theological.

I do not pretend to have the answers.  I do know I ask more often than most people I dialogue with how politicians propose to solve the problems of injustice they argue against, and I sometimes find those solutions – from whichever direction they come – untenable.  Just because the Republicans or Tories or etc might be wrong doesn’t make the Democrats, or Labour or anyone else right.

I have reached the conclusion in economics and government, just as in parenting, or in any other field,  it is important to remember that just because our intentions are good, that the consequences of our choices might be vastly different.  And so I am convinced that, important as any particular governmental policy might be, no system is going to be the total solution.  Our lives need to be imbued with both love and creativity to make any system work.

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Oh yes:  and the ability to recognize that we might just be wrong.

But that’s the topic of my next post.




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