In an article in Mother Jones magazine, called “Stimulus is for Suckers” he argues that the economic stimulus packages being presented to President-elect Obama are short sighted because they imagine that in a year or two the economy can be turned around. Further, he says the prevailing analysis of Ben Bernanke and Henry Paulsen that frozen credit is the problem is false.
Banks were unable to lend, they (Bernanke and Paulson) said, because they could not get the funds. This was not true, as we discovered when Treasury gave the banks the funds, only to realize that banks had no wish to lend them out. Instead they used the money to build capital and on dividends and executive pay. (Goldman Sachs, which received $10 billion as part of the bailout, got good press when it announced its top seven execs would forgo their year-end bonuses. But a government ban on bonuses was likely coming, and by limiting the sacrifice to top managers, the company retains leeway to spend the estimated $6.9 billion set aside for bonuses on slightly lesser employees.) In any case, banks did not wish to lend, and ordinary Americans, desperately cutting costs, did not wish to borrow, and with their homes underwater many had little collateral to borrow against.Galbraith outlines a number of solutions, all based on something that I think is an example of “commons thinking”. The premise for getting back to a healthy economy is to get money back into circulation, and Galbraith and his colleagues have done an analysis, shown in the chart below, that looks at where a dollar spent provides the most stimulus. As usual, when we look from the point of view of the common good, a dollar spent on things people need provides more stimulus than helping wealthy people keep their money. Interestingly, the most stimulus comes from spending money on food stamps and extending unemployment benefits. If you think a federal stimulus dollar should at least generate a dollar, making the current capital gains tax permanent is a real loser, followed by making the Bush income tax cuts permanent.
Bang for the Buck
What a dollar of stimulus puts back into the economy when spent on...
Illustration: Randall Enos
In his article, Galbraith lists a number of specific ideas, all of which are provocative, but one that really illustrates “commons thinking” is the following:
…we must change how we produce energy, how we consume it, and above all how much greenhouse gas we emit. That's a long-term proposition that will require research and reconstruction on a grand scale: support for universities, for national labs, for federal and state planning agencies, a new Department of Energy and Climate. It's the project around which the economy of the next generation must be designed. It's the key to future employment and future growth-and to our physical survival.Those plans which insure the physical survival of the human race on earth certainly meets our criteria of “common good.” A federal agency focused on Energy and Climate, and massive federal funding of all that will be needed to re-tool our planet away from oil, coal and gas, is truly commons thinking. But often critics of commons-based solutions will decry that it is all well and good to propose the idealistic things, but we have to be realistic and practical. (For the record, that which promotes human survival does seem practical to me.)
Galbraith ends his essay with this paragraph, which brings together all the sectors that will be involved in making this energy shift:
Energy transformation is key for another reason. Even during this crisis, the world has supported the dollar. Why? Because no alternative safe haven exists. Despite our faults, we have a well-designed economic system, the enduring fruit of the New Deal and Great Society. Thus Uncle Sam can borrow, at very low cost, whatever he needs-a terrific advantage over the competition. But in the long run, the world will support us only if we give something back. Ushering in new technologies that the rest of the world can adopt in order to save the planet is the right sort of gift. By helping to save the physical world, we may be able to save our currency, our credit, and our economy as well.I am going to allow myself and force myself to be a commons thinker over these holidays and see what I come up with in my much smaller world.