Paul Krugman, a Nobel-prize laureate in Economics, professor at Princeton University, and a columnist for the New York Times has published an extraordinary piece in the latest edition of Rolling Stone magazine. In it, he writes an open letter to President Obama, giving his advice on some steps that he'd advise the new president to take in order to get our economy back on track.
One of the solutions Krugman advises in his letter is for President Obama to "pass the Employee Free Choice Act, which would make it much harder for employers to intimidate workers who want to join a union." The economist believes that the legislation will "enable America to take a huge step toward recapturing the middle-class society we've lost."
Krugman begins by framing just how bad our economic situation is, calling it "worse than anyone imagined." Any type of growth over the last few years was "fueled by an explosion of private debt," leaving credit markets "in disarray," with "business and consumers...pulling back and the economy in free-fall."
One of the main problems, says Krugman, is that the "U.S. economy needs to add more than a million jobs a years just to keep up with a growing population," and as of today, we're "continuing to lose jobs at the rate of half a million a month."
Krugman looks, historically, at lessons from the FDR administration during its successful attempt at navigating our country through the Great Depression in the 1930's. A key take-away from FDR's success is that a president has to be "really bold in (his) job-creation plans." Otherwise, the economy turns to a vicious cycle: cutbacks on spending lead to a "shortfall in demand," which leads to a fall in employment, and continues to spiral.
FDR's biggest accomplishment, says Krugman is that the New Deal made America a middle-class society. He explains:
"Under FDR, America went through what labor historians call the Great Compression, a dramatic rise in wages for ordinary workers that greatly reduced income inequality. Before the Great Compression, America was a society of rich and poor; afterward it was a society in which most people, rightly, considered themselves middle class."Krugman suggests that in order to understand the "Great Compression," we should look no further than the rise of organized labor. Unions, he says, "not only negotiated better wages for their own members, they also enhanced the bargaining power of workers throughout the economy."
Krugman is also quick to point out a common critique of labor that was wrong then, and continues to be wrong now:
"At the time, conservatives warned that wage gains would have disastrous economic effects -- that the rise of unions would cripple employment and economic growth. But in fact, the Great Compression was followed by the great postwar boom, which doubled American living standards over the course of a generation."In the 1970's, however, the "Great Compression was reversed starting in the 1970s, as American workers once again lost much of their bargaining power. " Krugman suggests that we can create another Great Compression by enhancing worker's rights.
You can read the full letter here: http://www.rollingstone.com/politics/story/25456948/what_obama_must_do/printt. There's plenty of good stuff that we've left out of this blog post that's worth checking out, for sure.
