Monday, September 3, 2012

More on America as a Commercial Republic

I suggest, for further reading on the subject, Joseph Stiglitz’s book, The Price of Inequality.
by Charlie Leck

I had lots of reaction to Saturday’s blog, America as a Commercial Republic, and I appreciate it. Just under twenty readers wrote personal emails to me and, I’d say, the reaction was about 50/50. The emails contained a number of good suggestions by which I might further enhance my understanding of economics and economic theory and thus better understand “the commercial republic” about which our founding fathers, Alexander Hamilton and James Madison, wrote.

Among those suggestions came several about Joseph Stiglitz’s book, The Price of Inequality (on sale at Amazon for under $20). Stiglitz’s original doctoral thesis dealt with the question of income inequality and imbalance and how much the market could handle before it stifled economic growth. His latest book is an expansion on the original dissertation. One of the points made in that book, and which I was trying to make in Saturday’s blog, is that excessive, concentrated wealth has a massive impact on the balance of political power.

Stiglitz, about whom I have written on this blog a number of times, is a professor of economics at Columbia University and winner of the Nobel Prize in economics. He is not alone among economists who warn of a developing plutocracy in America (a democracy controlled by the affluent for their own interests). Stiglitz warns of an America that becomes dangerously divided by economic class. The mixed economy could easily disappear and be replaced by a sharply divided economy with virtually no middle class (or certainly a middle class unrecognizable in relation to our current definition of it).

I lean toward the opinions of Stiglitz and I admire his thinking and candor. His earlier book (with Linda J. Bilmes), The Three Trillion Dollar War, about the true cost of our war in Iraq, was an important contribution to our understanding of why the economy soured (long before Obama took office).

American capitalism, in the minds of economists and political scientists, has always been a force for contributing to the quality of life for all our citizens. That is what Hamilton and Madison were getting at in their concept of “the commercial republic.” Now, however, there is a real danger that the strong middle of the American economy is sliding downward and leaving a huge gap between the nation’s wealthy and the rest of the people. In the past there have always been corrective procedures in place within the American political system. Those procedures were severely weakened, however, by the Supreme Court’s decision in Citizens United whereby the nation’s corporations and significantly wealthy were given a bigger slice of political power (which was, of course, the thesis of Saturday’s blog).

I am afraid that a Republican victory in November will only exacerbate this developing political and economic problem in America.

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