Posted by: Bruce Nussbaum on October 28, 2008
My good friend and brilliant economist Mike Mandel has an interesting piece up online on why we need to redesign the US economy away from consumption to production. The key is the collapse of cheap credit that kept US consumers buying from China and every other country even as their real income stagnated and they ran up huge debts.
My own personal take on this is that the benefits of the huge rise in productivity in recent years, thanks to new information technologies and the spread of design thinking methods (i.e. innovation), did not accrue to the mass of middle class professionals who used them to create value but to a tiny number of upper managers and speculative financiers (hedge fund and Wall Street folks). Income inequality rose to 1920’s levels in recent years because the benefits of innovation and technology went to a few, not the many. That is why consumers went into debt and the financial system went bust.
We need a reform of the tax system that rewards users and producers of technology and the goods and services they create. We need a reform of the accounting system that recognizes and promotes R&D, education and human capital. Perhaps most important, we need reform of the corporate culture that rewards the mass of employees creating value, not the few managers at the top who capture an enormous share of that value. This means changing the winner-take-all mentality of business leaders.
We now need to redesign a system based on innovation that produces more than it consumes and exports more than it imports. Clearly, building a green tech economy is where we need to go. But to get there, we need to implement a new kind of economics that rewards and incentivizes innovation, not debt or financial speculation (hedge funds were based on incredibly low tax rates thanks to big spending on lobbying).
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