The Economics of Politics
August 21, 2011
Posted by on
The mainstream media works hard to convince us that Republicans and Democrats are locked in heated battle, with each side advocating dramatically different economic policies. Although there are differences between the two sides, members of both parties generally share common ground in opposing any fundamental changes to the workings of our economy.
A recent International Monetary Fund report on the U.S. economy sheds light on why this is so. The report includes the following four color-coded charts which compare economic recoveries (including our current one) according to various criteria.
As you can see from the red boxes in the first chart (the one titled “Real GDP and components”), our last two recoveries have been quite weak compared with previous recoveries in terms of growth in GDP, personal consumption, and investment in nonresidential structures. This indicates a growing problem with our economic fundamentals.
The red boxes in the second chart (“Households and employment”) indicate that our last two recoveries have also not been kind to working people as measured by the growth in nonfarm payrolls, unemployment, and disposable income.
However, things look quite different in the last two charts. The green boxes in the third chart (“Business sector”) make clear that the last two expansions have generally been good for nonfinancial corporations. And the dark green boxes in the fourth chart (“Financial”) highlight the enormous gains made by financial corporations in the last two expansions, and especially the current one.
The take-away from these charts is that business leaders experience our recent recoveries very differently than do the great majority of people. Despite the fact that growing numbers of workers find it hard to distinguish our expansions from our recessions, business profits keep climbing. And that is what matters to business. Not surprisingly, then, our corporate leaders are lobbying our political leaders hard not to change existing economic arrangements. If some austerity is needed to maintain stability–so be it. And, this lobbying has proven successful.
The connection between deteriorating economic and social conditions and high corporate profitability deserves careful study as does the question of whether this is a stable relationship. Regardless, these charts provide important insight into our national policy-making nexus. As long as our large corporations are prospering we should not expect our political process to produce meaningful change. The problem isnt a lack of good ideas for how to strengthen our economy and generate jobs, it is the lack of interest on the part of our elected leaders to seriously consider them. It appears that meaningful economic change will have to await either a further unraveling of our economic and social infrastructure or the rise of a powerful social movement with a new economic vision.