Neo-liberalism — supply-side trickle-down economics — has failed the world. However, a new economic thinking can save the day, according to a number of influential economists.
The new thinking is derived from John Maynard Keynes’ interventionist economic model, and is termed “progressive capitalism.”
According to Nobel laureate Dr. Joseph Stiglitz, decades of supply-side neo-liberalism has been damaging to society. And the greatest problem with the neo-liberal model has been the concentration of “market power.”
Dr. Stiglitz asserts that a tiny minority of businesses owned by super wealthy people has become dominant by exploiting information, buying up competitors, and creating entry barriers. These are businesspeople and billionaire investors — the owners of the world’s largest corporations — who are able to manipulate governments, drive public policy, and control world markets.
The term “rent seeking” refers to corporate power that exploits and oppresses, and has been to the detriment of Joe Public.
Capitalism, far from driving opportunity, has instead concentrated wealth and power in the hand of a tiny minority: the 0.0001 percent who practically own the world.
The free enterprise culture, coupled with corporate power, has destroyed the bargaining power of workers, created massive social and wealth inequality, and stifled economic growth.
Economic growth has become anaemic by a rent seeking that has destroyed the western working and middle classes and established monopolistic tendencies in the market. Strong consumer demand has historically been driven from the bottom up, not the top down.
Corporate power — the concentration of global production in a handful of businesses and investors — has created a billionaire class that is supremely powerful and that controls global wealth to the detriment of the working and middle classes.
The rise of populist anger, and the surge of the rabid right in western democracies, is directly linked to wealth inequality and the social disparity inequality has created.
Dr. Stiglitz believes that the power of the corporation will increase to an even greater level as a result of robotics and artificial intelligence that will further concentrate wealth and power in the hands of owners of multinationals and super corporations.
Consequently, the answer to overturning corporate power — to where the corporation is servant of the people and not master — demands strong government intervention.
Governments of the future must devise a culture of equity where firms that get out of line in terms of the public interest are swiftly proscribed.
This may entail a reversal of the neo-liberal idea that non-intervention in the marketplace is the panacea for economic prosperity.
Big government will offer the stick-and-carrot approach to corporations. Corporations will be encouraged to be good corporate citizens. Higher corporation taxes will be used by government to do the things that corporations simply won’t, such as training, development and provision of child care, health care, pensions, and social safety nets that do not allow people to exist on the fringes of society.
“Progressive capitalism” recognises that what is good for the corporation is not necessarily what is good for the employee of the corporation.
Government becomes the arbiter in balancing the needs of the corporation against the needs of the worker.
Within the context of the relationship between the worker and the corporation that is vastly more wealthy and powerful than the employee, government intervention is viewed as the way to resolve the imbalance. Governments possess tools to address this imbalance.
However, when government is financed by capitalist interests, this becomes an impossible undertaking, and the only way to address this inequity is through the political process, which is frequently rigged in favour of corporate interests.
This is a catch-22.
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