Rhode Island's Crisis of Inequality, and a First Step to Tackle It

Douglas K. Smith, guest blogger

Introduction

I am Doug Smith, the Executive Director of Columbia Journalism School’s Sulzberger Leadership Program. I have authored a number of books on best practice for business, based on three decades of consulting experience.  I am also one of the co-founders of Econ4, a network of economists and other analysts seeking to shift the way economics is taught, understood, and practiced—away from the failed practices that produced the Great Financial Crisis and the extraordinary income and wealth inequalities that now imperil our democracy.

On May 6, I submitted written testimony to the Finance Committee of the Rhode Island Senate in support of a proposed law to help rein in rising economic inequality in the state. The law would give preference in the awarding of state-government contracts to businesses that limit the ratio of pay between their highest-paid executive and lowest full-time employee to no more than 32-to-1. The text below is based on my testimony.

For Triple Crisis readers unfamiliar with Rhode Island, it is the smallest by area of the fifty U.S. states. It is, however, also the second most densely populated, making Rhode Island’s economy essential not just to Rhode Islanders but also people across the Northeast region of the United States. Today, Rhode Island’s economy is in serious jeopardy—in large part because of the raging income and wealth inequality imperiling people across the globe—from Greece to Great Britain and, yes, from Romania to Rhode Island.

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Rhode Island’s Crisis of Inequality, and a First Step to Tackle It

Douglas K. Smith, guest blogger

Introduction

I am Doug Smith, the Executive Director of Columbia Journalism School’s Sulzberger Leadership Program. I have authored a number of books on best practice for business, based on three decades of consulting experience.  I am also one of the co-founders of Econ4, a network of economists and other analysts seeking to shift the way economics is taught, understood, and practiced—away from the failed practices that produced the Great Financial Crisis and the extraordinary income and wealth inequalities that now imperil our democracy.

On May 6, I submitted written testimony to the Finance Committee of the Rhode Island Senate in support of a proposed law to help rein in rising economic inequality in the state. The law would give preference in the awarding of state-government contracts to businesses that limit the ratio of pay between their highest-paid executive and lowest full-time employee to no more than 32-to-1. The text below is based on my testimony.

For Triple Crisis readers unfamiliar with Rhode Island, it is the smallest by area of the fifty U.S. states. It is, however, also the second most densely populated, making Rhode Island’s economy essential not just to Rhode Islanders but also people across the Northeast region of the United States. Today, Rhode Island’s economy is in serious jeopardy—in large part because of the raging income and wealth inequality imperiling people across the globe—from Greece to Great Britain and, yes, from Romania to Rhode Island.

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Monsanto Meets its Match in the Birthplace of Maize

Timothy A. Wise

On April 21, a Mexican judge dealt a blow to the efforts of agricultural behemoth Monsanto and other biotech companies to open the country to the commercial cultivation of genetically modified (GM) maize. The ruling upheld the injunction issued last October that put a halt to further testing or commercial planting of the crop, citing “the risk of imminent harm to the environment.”

In a fitting tribute to Mexican surrealism, Monsanto had accused the judge who upheld the injunction of failing to be “impartial.” I don’t know if the presiding judge smiled when he denied Monsanto’s complaint, but I did.

I had just arrived in Mexico to look at the GM controversy, and I could tell it was going to be quite a visit.

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Big Banks Caught Red Handed but Continue to Avoid Prosecution

Bill Black, Guest Blogger

Sharmini Peries of The Real News Network interviews Bill Black, associate professor of economics and law at the University of Missouri-Kansas City and the author of The Best Way to Rob a Bank Is to Own One. Black discusses twin news events showing how big banks have been “caught red-handed committing frauds” and yet no government action in the United States has been undertaken to prosecute “any of the Wall Street elites whose frauds actually drove the crisis.”

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TPP Would Deepen Income Divide

Roger Bybee, Guest Blogger

Those at the top have never done better,” President Obama ruefully acknowledged in his January 28 State of the Union speech. “But average wages have barely budged. Inequality has deepened.”

Yet, moments later, Obama heartily endorsed the Trans-Pacific Partnership (TPP), which as drafted directly reflects the demands of “those at the top” and would, if passed, severely intensify the very inequality spotlighted by the president. The TPP would provide transnational corporations with easier access to cheap labor in Pacific Rim nations and new power to trump public-interest protections—on labor, food safety, drug prices, financial regulation, domestic procurement laws, and a host of others—established over the last century by democratic governments. The nations currently negotiating the TPP—which together comprise nearly 40%of the world economy—include the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Among them, Malaysia, Brunei, Mexico, Singapore, and Vietnam, are all notorious violators of labor rights The TPP’s labor provisions are far too weak to begin uplifting wages, conditions, and rights for workers in these nations.

As with NAFTA, the TPP will benefit U.S. companies relocating jobs to low-wage, high-repression nations, argues economist Mark Weisbrot, co-director of the Center for Economic and Policy Research (CEPR). This would also exert strong downward pressures on the pay of U.S. workers, “Most U.S. workers are likely to lose out from the TPP,” Weisbrot says. “This may come as no surprise after 20 years of NAFTA and an even-longer period of trade policy designed to put lower- and middle-class workers in direct competition with low-paid workers in the developing world.”

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Alarm Bells Over Antibiotic Resistance

Martin Khor

The World Health Organisation’s most comprehensive report to date sounds a warning that we are entering a world where antibiotics have little effect.

The World Health Organisation (WHO) has sounded a warning that many types of disease-causing bacteria can no longer be treated with the usual antibiotics and the benefits of modern medicine are increasingly being eroded.

The comprehensive 232-page report on anti-microbial resistance with data from 114 countries shows how this threat is happening now in every region of the world and can affect anyone in any country.

Antibiotic resistance—when bacteria evolve so that antibiotics no longer work to treat infections—is described by the report as “a problem so serious that it threatens the achievements of modern medicine.”

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Cultivating Responsibility: Where Does the Buck Stop in Agricultural Investment?

Jennifer Clapp

A recently published Oxfam briefing paper, Smallholders at Risk, challenges a number of mainstream assumptions about the role of private-sector investment in developing country agriculture. The conventional wisdom from the World Bank and other powerful actors is that private investment in the sector will benefit smallholders and enhance food security.

Oxfam’s research shows that, even in cases where private investors claim to be investing “responsibly”, the outcomes can nonetheless be harmful to food security and smallholder livelihoods. This happened in the cases the organization examined in Paraguay, Guatemala, and Colombia involving large-scale private investments in soy, oil palm, and maize that displaced farmers, degraded the environment, and contributed to hunger.

The general response to this kind of outcome has been to promote voluntary initiatives that encourage more responsible investment. A spate of recent initiatives explicitly seek to promote responsibility among investors in the sector: the responsible agricultural investment (RAI) principles currently being developed by the Committee on World Food Security, the Principles for Responsible Agricultural Investment (PRAI) promoted by the World Bank and UNCTAD, as well as a range of other initiatives including commodity specific certification schemes.

These efforts aim to ensure that private sector investment avoids the kind of pitfalls that Oxfam’s research highlights. But voluntary initiatives alone are unlikely to make much of a difference, no matter how strongly they are worded.

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Gujarat v. UPA: Models of Non-Governance?

Sunita Narain

The 2014 general election, it would seem, is becoming a referendum on the so-called Gujarat model and the something-UPA model. In the heat, dust and filth of elections, rhetoric is high, imagery is weak and facts are missing. Very broadly, the Gujarat model is seen to be corporate-friendly, with emphasis on economic growth at any cost and little focus on social indicators of development. The UPA [United Progressive Alliance] model, on the other hand, is seen to promote distributive justice and inclusive growth. And our conclusion could well be that this model does not work because we see little difference—high inflation pinches our purse; poverty and malnutrition persist; and crony capitalism thrives.

In this way, the referendum on May 16, when the counting is done, could well be seen as a go-ahead to rampant growth without a human face. But this, I believe, will be missing the key point.

If there is a referendum, it must be on the lack of delivery of programmes for social justice and inclusive growth. It cannot be a decision against the idea of rights-based development. That would be disastrous for India. So, what we need to do is to think about what went wrong. And the next government’s agenda must be to fix it. Not to throw out the baby with the bathwater.

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Are We All Post Keynesians Now?!

Philip Arestis and Malcolm Sawyer

Within two weeks in March, two publications came from the Bank of England which overturned the conventional wisdom of monetary policy and macroeconomic thinking of the past few decades. Yet the key elements of the contents of these two publications have been common knowledge in the post Keynesian community for many years.

The first came with the publication in the Bank of England Quarterly Bulletin of articles on the nature and endogeneity of money (and a video). The second came with the Mais Lecture delivered by the Governor of the Bank of England Mark Carney in which he argued that the narrow view of central banks as guardians of stable inflation as “fatally flawed,” as he unveiled a “transformative” overhaul of the Bank of England.

The endogeneity of money has been long known to post Keynesian economists and has formed the bedrock of their macroeconomic analyses for at least three decades. The practice of Central Banks has in effect similarly recognized endogeneity and the new consensus in macroeconomics did not mention money—money for this framework is a “residual.” The Bank of England was (not surprisingly) well aware of the endogeneity of money when it was instructed by the monetarist Thatcher government to pursue the task of controlling the money supply, which proved impossible since the money supply is endogenous!

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CBO Report Confirms U.S. Deficit Back to Normal Level

Robert Pollin, Guest Blogger

Jessica Desvarieux of The Real News Network interviews Robert Pollin, professor of economics at the University of Massachusetts and co-director of the Political Economy Research Institute (PERI), about a new Congressional Budget Office (CBO) report showing the U.S. fiscal deficit returning to historic norms. Pollin argues that the report confirms that the surge in the deficit after the financial crisis and recession was largely cyclical, that the report debunks the views of economists who claimed that high fiscal deficits would lead to economic disaster, and that it undermines arguments for austerity policies. He concludes that cuts to social spending should be reversed, and spending programs to be funded by progressive taxation like a financial-transactions tax.

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