Monday, December 3, 2012

James Galbraith Offers His Description Of Our Political Economy

I have always appreciated Galbraith's insights into the economy.  This article is no exception.  He describes an economy that is run by and for bankers and hedge fund managers.  Nothing good can happen, for most of us, until that changes.  The period from 1950 to 2000 is history.  That was a period in which bankers invested in developing the industrial economy.  We are now in a post-industrial world.  We will retain a segment of the manufacturing sector, but it is a shrinking sector of the economy.  Our default position has been to allow the financial sector to profit from the creation and destruction of asset bubbles. This is the major source of the growth in inequality that we are witnessing.  Economic instability is good for those who place long and short bets on the fluctuations in asset values.

Our politicians either don't understand the new economy, or they don't know how to deal with the changes.  We should not have saved Wall Street in the way that we did.  We should have transformed it when we had the opportunity.  The public sector will be even more important to deal with the instability of the new economy.  The service sector will continue to employ more people and it can provide valuable services, like education, healthcare, and support for the arts and the public park systems, from which people derive benefits.  In the process, we will have to end the dominance of the bankers, hedge funds and private equity managers who profit from the instability that they create.

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