Home > Uncategorized > Common sense economics

Common sense economics

from David Ruccio

In the United States and around the world, governments are responding to the twin pandemics—of novel coronavirus and escalating unemployment—with massive bailouts. Not unlike what happened more than a decade ago, after the global crash of 2007-08.

But there seems to be something different this time around—not only because of the speed of both the viral contamination and the economic meltdown, but also as a reaction to the terms of the bailout that was enacted in the midst of the Second Great Depression.

Here, for example, is 

During the last crisis, the global financial catastrophe of 2008, the authorities protected corporate interests above those of ordinary people, many economists assert. Britain and the European Union bailed out financial institutions, then recovered the costs by hacking away at public services, effectively punishing laborers and taxpayers for the sins of wealthy bankers.

Just like that, with no apparent controversy, he drops in the idea that, after the last major crash, those in charge sought to safeguard corporations and neglect the interests of “ordinary people.” That was certainly the stance, in the United States, of groups like the Tea Party and Occupy Wall Street but Goodman now asserts it as a commonly held view, with a gesture to authority (“many economists assert”).

Another example is NBC News Senior Business correspondent Stephanie Ruhle, certainly no radical, who argues the last bailout “didn’t trickle down to workers,” and strings need to be attached to corporations in any new bailout.

Even Donald Trump said he would be “OK” with a conditional coronavirus bailout that bans stock buybacks for companies that receive federal relief—joining both Bernie Sanders and Elizabeth Warren.

The question is, is something going on here—in the United States, Europe, and perhaps elsewhere—that represents a shifting of the ground, a fundamental change in the common sense concerning economic issues?

Now, to be clear, I am using the term common sense not in the manner of Thomas Paine or as it is often invoked in English, but instead as it figured prominently in the writings of the Italian Marxist Antonio Gramsci, in his Prison Notebooks. As Kate Crehan explains in the preface to her insightful and prescient book, Gramsci’s Common Sense: Inequality and Its Narratives (Duke University Press),

the Italian senso comune is a far more neutral term than the English common sense. The English term, with its overwhelmingly positive connotations, puts the emphasis, so to speak, on the “sense,” senso comune on the held-in-common (comune) nature of the beliefs. In the notebooks, Gramsci reflects on the complicated roots of such collective knowledge, its shifting and often contradictory components, the ways it becomes accepted as beyond question—and by whom—and when, and how it changes. The collective here is important: “What matters is not the opinion of Tom, Dick, and Harry but the ensemble of opinions that have become collective and a powerful factor in society.”

Common sense, as I am deploying it here, is a generally accepted, collective, body of knowledge, a way of understanding or interpreting what is going on in the world that appears, at least at any moment in time, as beyond dispute. Moreover, there is nothing fixed about common sense, since it can—indeed, we should expect it to—shift and change over time.*

So, again, the question is, has the common sense about economic issues been moving in a new direction in recent weeks?

It’s pretty clear, at least to those of us on the Left, that the $2.2 trillion (or, if you count the leveraging, close to $6 trillion) CARES Act is mostly a bailout to large corporations—Boeing, the airline industry, and, with little oversight, any other corporation that manages to get its snout into the trough.

In fact, as Tim Wu and 

The companies that will be receiving the largest bailouts were, until recently, enjoying unprecedented levels of corporate profitability, thanks to large corporate tax cuts, industry mergers and the avoidance of significant wage increases for employees.

And, indeed, spending enormous sums on stock buybacks, which reward only shareholders and increase executive pay.

But the way the bailout has been discussed, at least outside the halls of Congress and the White House, reflects a critique of the bailout of Wall Street and the automobile industry that was orchestrated by the administrations of George W. Bush and Barack Obama after the crash of 2007-08. The ground, it seems, has shifted.

graph_dl

The debate about the terms of the bailout—across media platforms, from many different pundits and political perspectives—has been much more attuned to how workers and others got completely shafted in the previous “recovery” and how corporations, banks, and the rich were handed bags of money, almost none of which “trickled down” to workers, poor people, and others at the bottom of the economic pyramid. Even more, the way the bailout was structured added to the ability of those at the top to capture the lion’s share of whatever new income and wealth were generated in the aftermath. My sense is, there is a common understanding that economic inequality in the United States got a whole lot worse because of the way the bailout was first envisioned and then enacted.

Even the Wall Street Journal now admits, joining others in acknowledging the new common sense:

what many remember from a decade ago is that after the banks were bailed out, the stock market and financial industry rebounded, while ordinary workers and homeowners struggled with stagnant wages and underwater mortgages.

But, of course, this shift hasn’t occurred in a vacuum. In addition to concerns about how the United States was transformed in a much more unequal manner during the Second Great Depression, people have witnessed how inadequate the U.S. private, profit-driven, medical-industrial complex has been in either preparing for or responding to the health pandemic.** And workers—those toiling away on the front lines of overburdened and perilous public health facilities, the many who are required to abandon their families and endure unsafe conditions while laboring in “essential” industries, and the millions and millions of others who are being forced to join the reserve army of the unemployed and underemployed—are the ones who are paying the costs.

To be clear, the outcome of this changing common sense is still quite uncertain. If it has shifted, and I think it has, it has taken on dimensions that both the nationalist right and the progressive left have been able to seize on. Private markets have failed, grotesque levels of inequality are driving the divergent costs of the health and unemployment pandemics, and the previous bailout enriched a small group at the top and failed, more than a decade on, to reach the vast majority of American workers. But that common understanding of what has gone wrong in recent years opens up new possibilities for both ends of the political spectrum when it comes to economic issues.

Where this changing common sense actually ends up will depend on who is more effective in pushing and pulling that collective understanding. As I see it, the final result depends on the work of intellectuals as well as the lived experience of the “masses,” the reporting on events in the media and the positions articulated by political parties, comparisons with what is happening in other countries and what can be delivered in newly imagined ways of organizing economic and social life.

There will be many, of course, who, in the midst of the current crises, will call for the previous common sense to be restored.*** My view, for what it’s worth, is that time is past. The old common sense has been effectively discarded. We just don’t know, at this point, which one will take its place.

 

*The other, related term that has some play in the United States is the so-called Overton Window, which was produced within public choice economics and is central to the work of the conservative think tank the Mackinac Center for Public Policy. What I don’t particularly like about the Overton Window is that it is defined not as a body of collective knowledge, which comprises “shifting and often contradictory components,” but instead as a set of policy options, a “window,” that forms the boundaries of political debate.

**The irony, of course, is, the ideas and policies that Bernie Sanders and Elizabeth Warren articulated during the campaign for the Democratic presidential nomination, which the extreme moderates in the party did their best to stamp out, have become increasingly “mainstream,” especially in reaction to the crash that has happened and will no doubt escalate in the midst of the health and unemployment pandemics.

***The tragic irony is that Joe Biden, the presumptive Democratic nominee, is precisely the candidate who has articulated and defended the Obama administration’s bailout and thus the old common sense. How exactly he’s going to invoke the previous common sense and position himself and his party to defeat Trump in the November election is anybody’s guess.

3f8769d49b7e3829b1a16458ae68256b

  1. April 1, 2020 at 3:50 am

    I hope that the “dead right wing Dogma” is indeed dead. I feel certain forces will endeavour to resurrect it. My thinking is that this pandemic resets political agendas away from the current ideologies, based onFriedman and Hayek and stuffed into academia giving it a credence we now see as undeserved, but still a danger.

    Here in Australia the neoliberal governments since 1983 have gone full tilt into austerity and neo liberalism, starting with the left, social democracy side, to first unravel the laws that gave us universal healthcare, free education and welfare etc. We retained most of these as the government was kept aware that lopping these were intolerable, so their tactic was to quietly whittle away the benefits and sell off government services to remake them as profit centres. This has threatened the ability of governments to act competently in this crisis. But our LNP has come around to the need to spend up with just a few weeks delay.

    Now we have to make sure they understand the common sense behind the economy. MMT explains it but is not accepted yet, except reluctantly. But as it is based on Laws, such as the constitution, and currency laws, and accounting identities, it just has to be common sense. That right wing dogma had no basis in reality should have been clear for decades. Let’s hope this pandemic has a silver lining.

  2. April 1, 2020 at 3:57 pm

    Thanks for reminding me of Gramsci, David. Kate Crehan’s book sounds as if its going to be worth a read.

  3. Benjamin
    April 2, 2020 at 10:19 am

    As of today there is not a single state or relevant political faction who has announced to reverse the tax free environment for the rich the world over. The rich are quietly hiding way out of the public consciousness as always when it comes to be responsible in a well definied open transparent and civilised manner.
    There is no real public debate ever about the so called tax heavens which are still in absolutely legal existence and working as designed.
    There is no legal way for the average worker to choose independently of each other a place of income, a place of living and a place to pay taxes.
    As of today the same people who brought about the neoliberal dogma into life and enforced freely and unquestioned the often rightwing dogmas on to the millions all over the planet are still presenting today’s solutions.
    As i see it, the state is taking the risk again, the banks are responsible for the arrangement of credits to a select few corporations and individuals and the rest, the majority can look after themself.
    They are too often simply not trained and knowledgeable enough to ask the state for help.

  4. Edward Ross
    April 3, 2020 at 8:33 am

    Some people of all persuasions are asking how are we eventually going to pay for pay for the cost of coping with the corona virus. To me the answer is quite simple and that is to really stop foreign corporations taking all of their profits out of the country without paying tax.

  5. Ken Zimmerman
    April 14, 2020 at 5:03 pm

    This conversation cannot be limited to economics. Nothing will be, can be resolved if only economics is discussed. Economics is only a small part of what is wrong with America. The US as a nation is involved in cultural wars. Americans no longer share the same common sense.

    Andrew Hartman begins his book, “A War for the Soul of America, A History of the Culture Wars,” this way.

    When Patrick Buchanan declared “a war for the soul of America” during his raucous primetime speech before the 1992 Republican National Convention in Houston, he reiterated a theme that had animated his underdog campaign against President George H. W. Bush in that year’s primaries. This theme was the “culture wars,” a struggle, in Buchanan’s words, “as critical to the kind of nation we will one day be as was the Cold War itself.” With such urgent rhetoric, the right-wing former adviser to presidents Richard Nixon, Gerald Ford, and Ronald Reagan aimed to elevate the stakes of that year’s presidential election. The nation was confronted with more than a choice between Bush and the Democratic challenger Bill Clinton: it was a decision “about who we are,” “about what we believe,” about whether “the Judeo- Christian values and beliefs upon which this nation was built” would survive.

    Buchanan’s notorious speech punctuated a series of angry quarrels that dominated national headlines during the 1980s and 1990s. Whether over abortion, affirmative action, capitalism, art, censorship, evolution, family values, feminism, homosexuality, intelligence testing, media, multiculturalism, national history standards, pornography, school prayer, sex education, the Western canon— the list of such divisive issues goes on and on— the United States was beset by “culture wars.” Buchanan’s “war for the soul of America” was on.

    Soon this was the cultural wars of the Republican Party, or at least that part of the party that was far right enough. The debate became deadly and the Republican Party granted nor accepted any quarter in the struggle. Any person or action that challenged the western, Christian, racist, misogynistic, capitalist free-markets, exceptionalism, and Constitutional-light that these “conservatives” considered the foundation of the US was to be not just resisted but destroyed, by any means necessary. Up till the election of Barack Obama as President these conservatives were willing to maintain at least the appearance of democracy in bending America to their creed. Afterwards they gave up this limitation. They would change America back to the vision they glorified, by any means and using any tools necessary, including violent revolution, and buying the country or selling it to the highest bidder.

    But the traditional American liberals who had won almost every political battle during WWII and after it through the 1960s missed all this. They saw the actions of these “mad” conservatives, but incorrectly judged that compromise was still possible. They were even willing to allow many conservative policies to be put into law so long as the big issues (racial integration, expanded voting, genuine religious freedom, equality before the law, etc.) were moving in the direction they supported. All the while, behind the scenes the right conservatives were undermining all these changes. Even today, the presumptive Presidential nominee of the Democratic Party, Joe Biden still claims, at least publicly that compromise with these conservatives is possible. As a former Obama staffer put it, appeasing these conservatives will likely get us all killed. The time for hard politics and hard and unpleasant push back is now. How hard we need to push and for how long remains uncertain. Again, according to another Obama staffer, perhaps when Mitch McConnell and Donald Trump inhabit prison cells the worst will be over. Sounds optimistic to me.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.