To restore the middle class

English: Economist James K Galbraith

English: Economist James K Galbraith (Photo credit: Wikipedia)

Again from The Predator State by James K. Galbraith:

“The true secret  lies in the aggressive regulation of wages. If you are a business in Sweden or Norway, you are free to import, export, and outsource as you like. There is, however, one thing you are not free to do: you are not free to cut your wages. You are not free to compete by going after cut-rate workers, either native or immigrant. You are not free to undercut the union rate. You have to pay your workers at the established scale, and if you cannot do that and earn a profit, too bad for your business.

“The effect of this on business discipline is quite wonderful. To succeed, business must find ways to compete that do not involve running down the wage standards of their workforces. They do it by keeping productivity high and investing in the search for technological improvement. this means that advanced industries thrive in Scandinavia, while backward ones die out. (Progressive businessmen prosper, while reactionaries fade away.) As a result, the economies as a whole stay competitive: the Scandinavian countries started the twentieth century poor and ended it at the top of the world’s distribution of income and wealth. The tax and welfare systems then make sure that everyone has enough to live on.

The United States is not Sweden or Norway. It is much larger, in particular, and for this reason it cannot move ahead as far or as fast as smaller countries. But the economic principles do not change when they cross the North Atlantic. And we have, in fact, applied them in the past. As Dorgan and Brown correctly state in their essay, this is how the American middle class got built in the first place. It was done not by ‘free markets’ but through unions, laws, regulations, and yes, standards. But the standards were not imposed on other people. They were imposed at home–where they can be enforced–and the rest of the world adjusted to what we did here. The problem, in short, is not foreigners and trade. The big problem is that unions, laws, regulations, and standards have been undercut by conservative policies right here at home. And the foundation stone of those policies is the idea that wages and prices should be set by the market, and not interfered with by the political process.”

Health care insurers

Insurance

Insurance (Photo credit: Christopher S. Penn)

From The Predator State by James K. Galbraith:

“A successful private insurance company follows an ancient formula: it stratifies its clientele by risk class and charges premiums adapted to each class. The most successful companies are generally those that manage to exclude the riskiest clients.

“Public universal health insurance schemes like Medicare do not evaluate risk. Since they are universal, they do not need to. Therefore, they save the major cost of providing private health insurance. They pay their personnel at civil service salary scales and are under no obligation to return a dividend to shareholders or meet a target rate of return. Insurance in general is therefore intrinsically a service that the public sector can competently provide at a lower cost than the private sector, and from the standpoint of an entire population, selective private provision of health insurance is invariably inferior to universal public provision. Private health insurance companies would not exist except for their political capacity to forestall the creation of universal public systems, backed by their almost unlimited capacity to sow confusion among the general public over the basic economic facts.”

The Predator State

Secretary of Defense Donald Rumsfeld shares a ...

Secretary of Defense Donald Rumsfeld shares a laugh with President George W. Bush and Vice President Dick Cheney during his farewell parade at the Pentagon. (Photo credit: Wikipedia)

The Predator State, How Conservatives Abandoned the Free Market and Why Liberals Should Too, by James K. Galbraith published in 2008. The predator state is the marriage between large corporations and government.

“Republican (with a small “r”) government, with its checks and balances, exists to limit the abuse of power. It is a matter of negotiation, compromise, the making of public arguments, and of listening to private dissent. Modern corporate decision-making structures exist, on the contrary, to permit senior executives to do what they want. This is the culture that Richard Cheney brought back into government from Halliburton, that George bush imbibed at his minor perches at Harken Energy and the Texas rangers. The operational result is a government by cliques operating in secret, indeed with their very membership unknown outside. Cheney’s 2001 Energy Task Force is a characteristic example. The neoconservative capture of foreign policy inside the Bush administration is another. The drive by Karl Rove‘s political office to direct the U.S. attorneys into political prosecutions is a third. The advance and defense of torture as a method of interrogation in secret prisons run by the CIA is a fourth. The program of warrantless wiretapping, which evidently amounts to the blanket capture by the National Security Agency of all Internet communications, is a fifth. The list could go on, but the practice is clear: we live under a government that as a matter of principle does what it wants.”