Spiritual Economics: A Discipline Whose Time Has Come—a talk at Common Ground

1.  Introduction

Common Ground is an interfaith center for inquiry, study, and dialogue about the human quest for spiritual understanding.  Their primary focus is on the world’s cultural, philosophical, religious, and spiritual traditions and their implications for every dimension of human experience in this post-modern world.  The main center is in Deerfield, IL, but there are “satellites” of the center in various suburbs of Chicago, including Flossmoor, IL near where I live.

On Wednesday, August 14th, John Wasik gave a talk on Spiritual Economics.   Most of the world’s economic systems are based on material growth linked to expansion of the gross domestic products. What these gauges don’t tell us is how people are really faring, their well being and prosperity. The U.S. has the largest GDP on the planet, but still has dramatic income inequality, a declining middle class, fractured health-care system and environmental maladies. How do we get beyond growth-based economics? John Wasik, author of The Cul-de-Sac Syndrome and The Merchant of Power shared his latest research for an upcoming book and outlined a strategy for a dignity-based economics.  Is speaks widely and writes a weekly Bloomberg News column that reaches readers of five continents and which earned him the 2009 Peter Lisagor award for journalism.

These are my notes from his talk; the conclusion at the end is my own, based on the contents of Mr. Wasik’s talk.

2.  The American Dream

The American dream since World War II can be summed up in the phrase “economic mobility”.  This can be stated as a) the likelihood that you will end up better off economically at retirement that you were when you entered the work force, and b) the likelihood that your children will be even better off economically than you are.

In the 1950s and 1960s, the belief was that “a rising tide will lift all boats.”  Prosperity in the economy as a whole, measured by GDP growth, would spread to all socioeconomic classes in society.  There was a virtuous cycle:

The people who work pay taxes, and these taxes go to pay for services.  The services would provide the societal infrastructure within which jobs could be readily created.  These jobs would pay wages to people, who would buy goods that wanted.  The sales of these goods would create the demand that would lead to more people working, and the cycle would start all over again.

There was a paternalistic work culture that favored a pension, which was a defined benefit that would be received upon retirement, above and beyond the social security payments those in the private sector would receive.

3.  The Great Unraveling

This is the title of a book by Paul Krugman on how the American Dream unraveled in the 1980s onward.  What were the forces that contributed to this great unraveling of the American Dream?

a.  The growth of the anti-government movement

Starting in the Reagan era, the political culture started to shift to reflect anti-government sentiments.  It was sold as a way to keep Americans from developing a dependency culture on the government, but it was in reality a way for the private sector not only to have its growth unrestricted by governmental regulations, but also for the private sector to start replacing the government sector as a source of spending in the economy.  Unfortunately, the reality is that the private sector has started to cannibalize public sector investment, as can be seen by the growth of the charter school movement, which takes public funds and funnels them away from public education and into the hands of for-profit corporations who run the charter schools.

b.  Disappearance of the manufacturing base

When capital investment controls were loosened, much of the manufacturing base was moved overseas to take advantage of cheaper labor costs.

c.  Globalism

The acceleration of capital investment abroad meant that not just the manufacturing base, but essentially the tax base oversea or, more accurately, offshore due to tax havens in the Caribbean, among others.

d.  Pensions changed to 401Ks

401Ks were originally designed as supplemental income streams like annuities for those with high-income anyway; they were never designed to replace pensions, but Wall Street encouraged Main Street companies to do so anyway.  As a result, defined benefit pensions were replaced by defined contribution 401Ks.  When the dot-com bubble burst in the 1990s, for many people, their so-called nest-egg was not sufficient for them to retire.

e.  Housing Bubble

For most of the 20th century, people thought of houses like bonds, a slow, steady investment that followed roughly the inflation curve.  However, the idea came after 2001 with the housing bubble that suddenly houses were like stocks that you could cash in like stock options or dividends.

f.  Wages flattened

Technology in the 1970s through the 2000s continued apace, and this increased the productivity of each worker.  However, as opposed to the productivity gains until the 1960s, the gains from that productivity were siphoned off by the corporations and not shared with the workers, so that wages have essentially remained on average flat since the 1970s.

4.  What will NOT work?

Before discussing the solution to our problems of income inequality, chronic unemployment and a stagnant wage structure for those who have jobs, let’s first discuss some of the suggested solutions which John Wasik believes will NOT work.

a.  Technology

Will technology bring about an improvement of wages for the average worker?  No, because although technology increases productivity, as we have already seen, any productivity gains will be retained by the corporations and not shared with its workers.

b.  More Growth!

Because of the mechanisms of economic inequality that are essentially ”baked into” our system at this point, more growth in the economy as a whole, measured say in GDP, will accumulate at the top and will NOT trickle down to the rest of the economy.  If you look at the stock market, it seems to be doing well.  That is because it is based on the “herd instinct” that future corporate earnings will increase.  Yes, but as we have seen, the structure of today’s economy is such that those increased corporate earnings will not translate into more jobs or more wages for those who already have jobs.

c.  Austerity

The idea of cutting government budgets in the case of a budget deficit probably has deeper roots in theology, particularly Old Testament theology, than it does in sound macroeconomic policy.  If the government and the private sector are the two sources of investment, the idea is that if you cut down the spending in the government sector, the private sector will “pick up the slack.”  In reality, it has done no such thing.  Banks have taken the TARP handouts from the US government sector and used them to shore up their balance sheets, but have NOT turned around and used that capital to lend to homeowners and businesses.

As Paul Krugman has mentioned before, we are in a parallel situation to 1937, where at the first sign of even moderate growth, the Republicans put on the brakes and demanded cuts in spending, and sent the economy back into a recession.  You don’t have to relearn the lessons of the Great Depression; just look at what has already occurred in Britain, as they adopted austerity measures only to have it start hurting economic growth (they are now in a so-called “double-dip recession”).

5.  What WILL work?

So if technology, more growth, or austerity will not get us greater prosperity and return us to, if not the same income mobility we had after World War II, to at least a situation where we are not LOSING ground?

According to the Keynesian school of macroeconomics, the only way to stimulate demand at a time when interest rates are nearly flat, and monetary policy is therefore totally ineffective, is to have the stimulus come from the fiscal side, i.e., from  government spending.  This can be used in combination with the following, to create true prosperity for all Americans:

a.  Innovation

If those 1.6 million people in the retail industry were to have their wages lifted to a living wage, it would end up through multiplier effects to improve the lives of 1/3 of Americans!  What happened when the pent-up demand of Americans was unleashed after World War II?  The goods and services demanded unleashed a stream of innovations from other Americans to meet those needs.

b.  Infrastructure

The American Society of Civil Engineers puts out an annual report card on the state of America’s infrastructure.  The 2013 version of this report card gives America a D+ on infrastructure, and the money needed by 2020 to address the crumbling infrastructure of America would be $3.6 trillion.  This sounds like a fantastic sum, except when you compare it to the true cost of the Iraq War, which according to Joseph Stiglitz and Linda Bilmes was close to $3 trillion.

c.  Electricity Grid

A subset of the infrastructure needed to be modernized is the electricity grid.  Just to modernized it and digitize it would require $1 trillion out of that $3.6 trillion.  This does not even take into account the infrastructure spending on renewable energy which would end up paying for itself in the long run.

d.  Lwarps

What is “lwarps”?  It is the reversal of the word “sprawl”.  This means we need to rebuild our inner suburbs and abandon the outer suburbs, and reverse the process of suburban sprawl that started in the 1950s and is now unsustainable from an energy standpoint.  The latter has already taken place in places in the Southwest after the bursting of the housing bubble.  An interesting phenomenon is taking place and that is the growth of family farms in the rural areas around metropolitan areas which is being fueled in turn by the growth of farmers markets in these inner suburbs.  A case in point:  I buy jams and jellies at a farmers market near Flossmoor, IL.  In talking to the person from the local bakery who has the booth there, she gets all of those jams and jellies from the Amish who make them on farms that are just on the border between the southern Chicago suburbs and rural areas that surround them.

e.  Health Care

Part of the rising costs for individuals and businesses is that of health care, which represents 17% of all economic activity in the US.  It has to be restructured, and in this context, the Affordable Care Act is only a band aid, and not a permanent solution.  Only government administering of the payments to health providers (NOT the same thing as socialized medicine, which is where the government IS the main health provider) will reduce the disincentives in the system, as it exists now, to rein in costs.

f.  Education

This needs to be a growth industry, but not in the sense of taking public funds and using them to enrich politically well-connected for-profit corporations, but in the sense of investing at the community college level to make sure that education is once again a viable option for all Americans, regardless of socioeconomic status and/or age.

g.  Civic Institutions

One of the things that held the fabric of American society together after World War II was the growth of civic institutions like the Kiwanis Club, the Rotary Club, and other similar entities which bridged the gap between the business community and the overall needs of the communities in which they existed.  This is not only a question of various philanthropic or charitable projects that they undertook but also the sense of well-being that they provided its members which came from a sense of being connected with others in the community.

Since government spending on social needs has dropped precipitously, there is a need now for more and more people to join these kinds of institutions which help the communities they are in by helping them help themselves.

It’s amazing what one can do when one gets together with others in the community.  As the final example of his talk, Mr. Wasik said that in Lake County (north of Chicago), there were many people that complained when property taxes went up that they didn’t understand the very complicated and opaque property assessments that would be done every year.  They created a movement to make the process more opaque and to allow people a process by which they could appeal the assessment if they disagreed with the factual basis for it.

The movement was so successful in Lake County that it was taken by their Illinois representative to the State Legislature where it was enshrined in law.  Now everybody throughout the state is privy to this more transparent assessment procedure AND has the ability to exercise their right to appeal that assessment.  This concrete step towards the preservation of homeowner’s rights all started because of a small civic group in one town of one county in the state of Illinois!

6.   Spiritual Economics:  A Discipline Whose Time has Come

Rather than a person’s wealth being measured by the amount of money that it has his or her disposal, one way to measure a person’s prosperity is the number of connections they have to others in the society, with the priority being local connections.   I’m not talking about Facebook or digital-only relationships, but honest-to-goodness face-to-face relationships with others.

The model here is that of a geodesic dome, the one designed by Buckminster Fuller.  He created a structure made of numerous nodes which have numerous links from node to node.  Each link in and of itself is not particularly strong, but when they link together, the geodesic dome can withstand up to gale force winds.

And at a time when the stagnant economy is sending gale force headwinds blowing all across America, linking together at the local level as with the links of a geodesic dome, will help us all weather the storm!


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