Excellent essay. The trickle-down economics from the first economy to the second has not panned out as experts and elites envisioned. Or maybe it has, but the narrative being sold was a poor bargain for many who depend on the second economy. The first economy has generated amazing pockets of mass affluence, but the second economy often fights for table scraps.
The ownership economy and the laborer/tenant economy have drifted far apart with very concentrated rewards to the first. I totally agree that neither political party is talking about the issue correctly. Giving someone the opportunity to enter a Monopoly game late once all the squares on the board are owned is not much of a deal. Obviously, the real world is more complicated, but consolidation and concentration clearly change the political economy in ways that threaten a healthy democratic system. At the heart of such a system of laws and rules, we need economic opportunity as well as economic rewards that enhance the general sense of personal security. Talking points on the former with failed delivery on the latter seems to be happening with each turning of the election cycle. Thus, it appears to be structural.
A deeper discussion would lead to tax policy (not the rates, but the actual mechanism) and antitrust policy. Antitrust policy is perhaps too narrow of an idea to address the issues between the first and second economies. A broader political assessment of corporate policy might be necessary. I’ll leave it there.
Again, wonderful distinctions captured in your essay!
Thanks Joe! I’ve been thinking about this work issue a lot. I’m not sure what the policy solution is yet but I feel like it’s going to have to be innovative. It’s nothing we’ve tried yet for the twentieth century economy.
It feels like too many elites in California are more interested into fun social engineering policies than they are the boring nuts and bolts of making things work.
The author writes: *America boomed because the rest of the industrial world was devastated in a global war.* Prosperity back then was easy and effortless, so it was easy to grow resources and national power while opportunity increased without much thought or effort"
I believe the portion set off by asterisks is a bit of had waving classical liberals use to explain away the very good postwar economy that should not happen according to the economics they propound. That economy operated under very different policy choices than the one we have today. I believe the differential performance is due to different business/economic cultures prevalent during the two periods--cultures that are selected for by the different policy environments. See link for how cultural evolution shifts from one culture to another:
I use the term neoliberalism for the policy choices that select for shareholder primacy (SP) culture. This term is often used for such policy choices with no reference to culture. More here:
As you note, neoliberalism/SP culture (what we have today) works for the First Economy, but not so much for the Second Economy. I see no reason, in theory, for why we cannot go back to something like SC culture to get an economy that does a good job on both First and Second Economy. I believe this is *technically* possible:
It has always seemed to me that expanding the Earned Income Tax Credit (EITC) which only goes to those who work would be an almost frictionless way to spread the benefits of an expanding economy to more of our citizens. Increasing taxes on the very wealthy could pay for it and it would not provide a disincentive to work.
Excellent essay. The trickle-down economics from the first economy to the second has not panned out as experts and elites envisioned. Or maybe it has, but the narrative being sold was a poor bargain for many who depend on the second economy. The first economy has generated amazing pockets of mass affluence, but the second economy often fights for table scraps.
The ownership economy and the laborer/tenant economy have drifted far apart with very concentrated rewards to the first. I totally agree that neither political party is talking about the issue correctly. Giving someone the opportunity to enter a Monopoly game late once all the squares on the board are owned is not much of a deal. Obviously, the real world is more complicated, but consolidation and concentration clearly change the political economy in ways that threaten a healthy democratic system. At the heart of such a system of laws and rules, we need economic opportunity as well as economic rewards that enhance the general sense of personal security. Talking points on the former with failed delivery on the latter seems to be happening with each turning of the election cycle. Thus, it appears to be structural.
A deeper discussion would lead to tax policy (not the rates, but the actual mechanism) and antitrust policy. Antitrust policy is perhaps too narrow of an idea to address the issues between the first and second economies. A broader political assessment of corporate policy might be necessary. I’ll leave it there.
Again, wonderful distinctions captured in your essay!
Thanks Joe! I’ve been thinking about this work issue a lot. I’m not sure what the policy solution is yet but I feel like it’s going to have to be innovative. It’s nothing we’ve tried yet for the twentieth century economy.
Our (California) elites also don't understand what strong infrastructure is: https://www.youtube.com/watch?v=yH19B6dMXx0
It feels like too many elites in California are more interested into fun social engineering policies than they are the boring nuts and bolts of making things work.
The author writes: *America boomed because the rest of the industrial world was devastated in a global war.* Prosperity back then was easy and effortless, so it was easy to grow resources and national power while opportunity increased without much thought or effort"
I believe the portion set off by asterisks is a bit of had waving classical liberals use to explain away the very good postwar economy that should not happen according to the economics they propound. That economy operated under very different policy choices than the one we have today. I believe the differential performance is due to different business/economic cultures prevalent during the two periods--cultures that are selected for by the different policy environments. See link for how cultural evolution shifts from one culture to another:
https://mikealexander.substack.com/p/how-economic-culture-evolves
A more complete explanation is in this (longer) peer-reviewed paper
https://escholarship.org/uc/item/9x36913k
I use the term neoliberalism for the policy choices that select for shareholder primacy (SP) culture. This term is often used for such policy choices with no reference to culture. More here:
https://mikealexander.substack.com/p/what-is-neoliberalism-an-empirical
We lost that “golden” economy because of Democratic policy failure in the sixties:
https://mikealexander.substack.com/p/how-the-new-deal-order-fell
As you note, neoliberalism/SP culture (what we have today) works for the First Economy, but not so much for the Second Economy. I see no reason, in theory, for why we cannot go back to something like SC culture to get an economy that does a good job on both First and Second Economy. I believe this is *technically* possible:
https://mikealexander.substack.com/p/why-neoliberalism-should-be-replaced/comments
But it is politically impossible at present. At a minimum you need a new political dispensation:
https://mikealexander.substack.com/p/the-importance-of-a-political-dispensation
It has always seemed to me that expanding the Earned Income Tax Credit (EITC) which only goes to those who work would be an almost frictionless way to spread the benefits of an expanding economy to more of our citizens. Increasing taxes on the very wealthy could pay for it and it would not provide a disincentive to work.