A BASIC COMPONENT OF CIVICS

With the a new year upon us in a few days, I thought it would be a good time to write about one of the basic social relationships with which all nations – for that matter, all social collectives – must deal. According to Marxian thought, this relationship is the main one that societies must handle. That is the one between both a nation's wealth creation and distribution and the rest of its institutions; i. e., the function an economy plays in determining how the nation goes about its “business.”

I don't believe any blog needs to convince you that the role of the economy is central to the concerns of a nation. Our media gives this aspect of national life sufficient coverage to satisfy the demands of its readers and viewers to stay informed over the ins and outs of the world of businesses and job markets, investments and bankruptcies, savings rates and consumption rates, etc. We seem to be constantly concerned about whether the economy is growing toward a state of prosperity or whether it is mired in a sluggish recovery as it is now. At times, we have been in prolonged periods of downturns in varying degrees of recession and even depression. We are presently justifiably worried that pending tax raises will snuff out our anemic climb out of the dismal conditions that the 2008 crisis triggered.

Nobel prize winning economist, Joseph E. Stiglitz,¹ points out that, on a worldwide basis, governments are not doing what we should expect them to do when it comes to economic policy. He explains that we should expect them to put in place those policies that stabilize economic conditions. Yet, governments have allowed destabilizing levels of unemployment and underemployment to persist. By doing so, their polices (or lack of policies) have allowed under-utilization of resources – specifically labor resources – while, at the same time, sacrificing our commitment to fairness. In our nation, the interests of the 99 % have been advanced by their advocates claiming that, one, markets are not working correctly, two, markets are not efficient, and three, the political systems are not correcting the conditions that cause the markets to be dysfunctional. After all, under traditional market dictum, markets are supposed to be stable, but the crisis of 2008 amply demonstrated that they are not. For example, reviews of the behavior of bankers, the main culprits in the financial collapse, from commentators from both the left and right, have indicated that they behaved according to rational incentives – what market theory calls for. Given the inability of the markets to self-correct in the months leading to the debacle of '08, that would indicate that there were, and some fear still are, basic problems with the purity of related markets, such as the market for real estate.

Dysfunctional markets lead to conditions that defy basic economic laws such as demand equals supply. As wealth and income are skewed to certain upper segments of the population, there are huge levels of unmet needs. This is due to significant unemployment which in turn becomes a major cause for inequality. GDP might go up, but standards of living erode and that is the high price of extreme inequality. Why? Because the conditions that lead to less stability in our markets transform markets into becoming less efficient and, ultimately, this leads to less than optimal growth in the economy. As a result, all of these negative conditions come about and, by the way, we place our democracy in peril.

Dangers to our democracy can have many origins, but of basic concern here is what significant levels of inequality can lead to: a lack of legitimacy. Citizens, under whatever system of government or whatever set of governing principles is employed, must feel that certain standards of fairness are maintained. But when there is a large disconnect between the compensation some receive and the contribution to the society or economy those individuals provide, then the fairness standard is strained. This was the case when the economy imploded in '08. When we hear that bankers received large amounts of compensation in the form of salaries and bonuses despite the fact that the banks these individuals work for lost great amounts of money, the entire set of assumptions regarding how efficient the market for executive talent is is seriously questioned. We see and understand that the misdeeds that the culprits of 2008 perpetrated on the rest of us have gone mostly unaccounted for and this fact can be the basis for a lack of legitimacy in the system itself.

From the federalist perspective, the above conditions have several points that are disturbing. Most basic is that skewed wealth and income which we have experienced in the last decades are in itself troubling. Only the most naïve cannot see the instability such a condition causes. One does not have to feel envy to begin questioning the whole purpose of the system. When a system loses all sense of “we are all in this together” and instead adopts a feeling that one is only here to meet the interests of an obscure ideal or, worse, the interests of some advantaged group, then the rationale for our democratic project is undermined. And hence, the role of civics should be to not only describe and explain the economic conditions that are affecting the democratic quality of the governing system, but also to educate the youth as to their interests and the means by which to improve the status of those interests. It should do this if for no other reason than to help restore a more democratic society. One need not be a Marxist to see this basic relationship and demand that our educational efforts address its related concerns in establishing and/or maintaining a meaningful level of equality.

1The concerns expressed in this posting inspired from Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. New York, NY: W. W. Norton and Company.