AND THE 9110_9789814590501_tp indd GLOBAL ECONOMIC TURMOIL PUBLIC GOOD 4/3/15 9:53 am May 2, 2013 14:6 BC: 8831 - Probability and Statistical Theory This page intentionally left blank PST˙ws AND THE GLOBAL ECONOMIC TURMOIL PUBLIC GOOD Steven Rosefielde University of North Carolina, USA Daniel Quinn Mills Harvard Business School, USA World Scientific NEW JERSEY • LONDON 9110_9789814590501_tp indd • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TA I P E I • CHENNAI 4/3/15 9:53 am Published by World Scientific Publishing Co Pte Ltd Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Rosefielde, Steven Global economic turmoil and the public good / by Steven Rosefielde (University of North Carolina, USA) & D Quinn Mills (Harvard Business School, USA) pages cm Includes bibliographical references ISBN 978-9814590501 Global Financial Crisis, 2008–2009 Economic policy Economic development Finance, Public I Mills, Daniel Quinn II Title HB37172008 R67 2015 330.9'0511 dc23 2014037409 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Copyright © 2015 by World Scientific Publishing Co Pte Ltd All rights reserved This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA In this case permission to photocopy is not required from the publisher In-house Editors: Dipasri Sardar/Philly Lim Typeset by Stallion Press Email: enquiries@stallionpress.com Printed in Singapore Dipa - Global economic turmoil.indd 10/2/2015 3:40:25 PM b1962 Global Economic Turmoil and the Public Good 9x6 For David Rosefielde b1962_FM.indd v 21-04-2015 09:02:26 May 2, 2013 14:6 BC: 8831 - Probability and Statistical Theory This page intentionally left blank PST˙ws b1962 Global Economic Turmoil and the Public Good 9x6 Table of Contents Executive Summary Preface Foreword Acknowledgments ix xi xiii xv Part I Global Economic Turmoil Chapter Playing with Fire Chapter Ignoring Today’s Dangers 11 Chapter Insider Democracy 37 Chapter Squeezing the Middle Class 57 Chapter Liberalization for the Privileged 69 Chapter East–West Polarization 87 Chapter Degeneration, Crisis and Disorder 91 Part II Obstacles to Crisis Prevention 95 Chapter Words Instead of Action 97 Chapter Treadmill of Regulation 107 Chapter 10 Macroeconomic Miasma 127 Chapter 11 Dogmatism 137 vii b1962_FM.indd vii 21-04-2015 09:02:27 b1962 Global Economic Turmoil and the Public Good viii 9x6 Table of Contents Chapter 12 Pipe Dreams 141 Chapter 13 Doublethink 145 Part III Framework for Sustainable Prosperity 149 Chapter 14 The Importance of Inclusive Economic Theory 151 Chapter 15 Breaking Vicious Cycles 155 Chapter 16 Lesser Evil 163 Chapter 17 Prospects 173 Conclusion 179 Bibliography 183 Index 191 b1962_FM.indd viii 21-04-2015 10:32:45 b1962 Global Economic Turmoil and the Public Good 9x6 Executive Summary The promise of global economic liberalization has given way to a crisisprone, economically stagnant, politically fragile new world order The origins of the problems of economic crisis, stagnation, ballooning inequality, middle class affliction and global polarization lie in the political system — they are not primarily economic It follows that the route to avoiding future financial crises and to restoring economic growth lies in preventing politicians from riding roughshod over prudent economic policy The challenge posed by secular stagnation, crises, decay and discord today cannot be adequately understood in traditional terms The main driver is insider globalization; that is, the worldwide quest by national establishments and their various allies to maximize rewards for themselves derived from government programs, corruption, self-serving regulation, over-taxation, fiscal leverage, credit expansion, liberalization, supranationalization and emergent world government Globalization on western terms is dead Russia, China and various nations of the Middle East have been afforded a major opportunity to bend the global power balance their way with multiple instruments including military force, flouting the START arm control agreement, subversion, intimidation, market power and “enlightened conservative” authoritarian ideologies The resulting struggle for hegemony will exacerbate the gathering economic storm ix b1962_FM.indd ix 21-04-2015 09:02:27 b1962 Global Economic Turmoil and the Public Good 9x6 Index compensation profit over, 20–21 wage under, 19 competitive ideal, 30, 30n18 competitive markets, reform for, 159–160, 176–177 compression, of middle class, 64–68, 65n23 contracting, by governments, 54n47, 73, 73n12 Corbat, Michael, 67n30 corporate profits, peak of, 20–21 corruption, 42n17, 49, 49n37, 71, 84n35, 93 CPS See Current Population Survey credit allocation, 117–118 expanding, ratings, 115, 115n10 crises, 119 See also financial crises crisis prevention, obstacles to See also regulation dogmatism, 137–141, 143–144 doublethink, 145–148 macroeconomic miasma, 127–136 pipe dreams and, 141–146 words instead of actions, 97–105 critical rationality, xii Current Population Survey (CPS), 26n13 data macroeconomic, xii, 128–129, 129n2, 131–132, 157 microeconomic, 129, 131 debt See also sovereign debt deflation, 139n12 b1962_Index.indd 193 193 federal, public holding, 175, 175n2 reduction, 121, 175 in vicious cycle, 155 Defense Department, 39n8 deficit spending austerity and, 26–27 in Australia, 135–136 increasing, 6, 13, 29n15, 84, 165–166, 165n6 Keynes advocating, 18n10, 128, 137–138 perils of, 55, 66n29, 68 reduced, 175 in US, 155–156, 161, 175 deflation, 30, 139, 139n12, 147 deleveraging, 139–140 demand, laws of, 41–42 democracy See also sovereign democracy economy supported by, insiders in, 40, 40n14, 43–48, 51–53, 55, 56, 58–59, 158 legitimacy of, 99 political opponents in, 98 reform and, 119 small government and, 166–167 Democrat Party, 8, 11n1, 24, 62n12 deregulation without reform, 123–124, 177 Republican Party and, derivatives, 33, 82, 114–116, 160 developing countries, 71, 101 digital monopolies, 114n9 disposable income, of middle class, 67, 67n31 divine coincidence era, 81–83, 139 division of labor, 73–74 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 194 Index Dodd–Frank Act bailouts and, 111, 111n7, 113, 116n14 reform and, 119–120, 120n16 regulation and, 109, 111–113, 111nn7–8, 116n14, 119–120, 122n19 dogmatism, macroeconomic, 137–141, 143–144 doublethink antidote to, 151–152 as crisis prevention obstacle, 145–148 insiders and, 43n19, 69, 145–148, 152 introduction to, 6–7 as motivated blindness, 145, 145n1 east–west polarization China and, 87–89, 88nn2–3, 162 EU and, 87, 89, 162 global economic turmoil and, 87–89 origins of, 173, 179 Russia and, 87–89, 88n3, 162 US and, 87–89, 88n3 easy money, 29n15, 29n17, 66–67 econometric results, 128, 128n1 economic activity, 152–154 Economic Policy Institute (EPI), 163 founding of, 14n6 graphs compiled by, 14–29, 26n13, 64 economic sanctions, 7, 88, 162 economic theory See also inclusive economic theory; macroeconomic theory endogenous economic growth, 55n50 neoclassical, 20, 34, 133, 152, 154 b1962_Index.indd 194 9x6 Economist, 114n9 economists, 14n6, 30n18, 34, 43n19, 120 doublethinking by, 43n19, 147, 152 macroeconomics and, 127, 130–135, 138, 140 economy See also global economy; political economy competitive ideal of, 30, 30n18 democracy supporting, depressed, 3, 4n3, 4n5, 8n16, 92n1 policy-making, 132–133 poor benefiting from, 101 subpar growth in, 13, 98 systems, appraisal of, 166–170 transition, in China, 104–105, 174 Edelman, Richard, 58n4 emotion, 124–125, 142 employment See also unemployment interest rates and, 13n4 self-employment, 60n5 underemployment, 22 employment-to-population ratio, of workers age 25–54, 16 endogenous economic growth theory, 55n50 enlightened conservatism, 39, 39n10, 180 entitlements, 141–142, 158–159 EPI See Economic Policy Institute Essais de Théodicée sur la bonté de Dieu, la liberté de l’homme et l’origine du mal (Essays on the Goodness of God, the Freedom of Man and the Origin of Evil) (Leibniz), 146 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 9x6 Index establishment defined, 39, 39n9 globalization driven by, 73–80, 84–85 estate tax, 62, 62n9 EU See European Union European Central Bank, 116–117 European Commission, 78–79, 78n23 European Union (EU), 84n35, 160, 164–165 core problems facing, 163 depressed economy in, 3, 4n3, 4n5, 8n16 east–west polarization and, 87, 89, 162 entitlements in, 141–142 globalization and, 75, 77–78 liberalization in, 75, 77–79, 77n22, 78n23 macroeconomic miasma in, 127 in 1990s, 70 pipe dream big government in, 167 regulatory and rent granting apparatus, 78–80, 78n23, 79n25 Third Way of, 14n6 eurozone, 4n5, 77–79, 77n22, 78n23 executive compensation, 20–22 executive orders, 32, 32n27 export, manufacturing for, 104 family, breakdown of, 48n35 Fannie Mae, 83n30 farm bill, 85n36 fascism, 143 FDIC See Federal Deposit Insurance Corporation federal debt, public holding, 175, 175n2 b1962_Index.indd 195 195 Federal Deposit Insurance Corporation (FDIC), 44n24 federal income taxes, 60n6 Federal Reserve, 109, 120n16, 121 average pay at, 44n24 deregulation and, 177 Greenspan and, 82, 124, 177 interest rates and, 3, 122n19, 125, 147, 173n1 Yellen and, 5n9, 122n19, 139, 141n1, 161 feudalism, 57n1, 58 financial crises See also crisis prevention, obstacles to; post-crisis recovery; 2008 financial crisis causes of, 33, 127, 173, 179 emergency measures for, 155 French Revolution and, 58 future, 3, 4n3, 6, 12n2, 14, 35, 98, 102, 110–111, 114, 120n16, 122, 122n19, 160–161 insiders and, 55–56, 136 phony-war stage of, 4n5 reform undermined by response to, 118–122, 120n16 vicious cycles of, breaking, 155–162 financial industry concentration, reform of, 160 Fiorina, Carly, 94n3 first estate, 57–58, 62, 63n17 food stamps, 99–100 foreign adventurism, 9, 162–163 401(k), 24, 26n13, 44n21 Fowler, Liz, 46n30 Frank, Barney, 97n1 Freddie Mac, 83n30 freedom, 92n1 French Revolution, 57–60, 58n3, 63n17, 68 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 196 Index GDP See gross domestic product Geithner, Timothy, 124 General Theory (Keynes), 137 George IV (king), 134–135, 134n3 Germany, 5n8 gift tax, 62, 62n9 Gilbert, Lisa, 122n19 Gini coefficient, 169–170, 169n15 global economic turmoil challenge posed by, 179–180 disputable assertions about, 163–166 east–west polarization and, 87–89 gathering storm of, 93–94 globalism and, governments causing, xi–xii, 7–9, 11–12, 14n5, 31–32, 55–56, 173–174 “having your cake and eating it” in, 6–9, 6n12 increase in, 3–5 insider democracy and, 40, 40n14, 43–48, 51–53, 55, 56, 58–59, 158 lesser evil in, 163–171 liberalization and, 69–85 long-term causes of, 11–12 macroeconomic policy and, 127–140 middle class and, 58–68 political and social strife in, 93 steps to reverse, 173–177 global economy capital markets negatively impacting, 118 market competition restored in, 176–177 new, 45, 56n51 b1962_Index.indd 196 9x6 objectivity about, 156–157 prospects of, 173–177 reality of, 45–46 restructuring needed for, 12, 14 stimulus overdose in, 92 globalism, globalization Ancien Régime recreated by, 46 defined, 87 establishment driving, 73–80, 84–85 EU and, 75, 77–78 infrastructure spending and, 71n5 insider, 84–85, 179–180 liberalization and, 69–80, 70nn1–2 primary features of, 73 supply and, 75–77, 79, 81 US and, 75, 79–80, 180 global wealth tax, 32n30, 73n11 Goebbels, Joseph, 102 Gosar, Paul, 164n3 governments abusive, 7, 14n5, 32, 165 contracting by, 54n47, 73, 73n12 decreased size of, 161–162, 175 excessive interference by, 41–43, 42n17, 69, 93 global economic turmoil caused by, xi–xii, 7–9, 11–12, 14n5, 31–32, 55–56, 173–174 inclusive economic theory and, 154 indirect methods of, 39 legitimacy of, 99, 143n4 pipe dream big, 166–167 public trust in, 58n4, 165, 165n4 reform of, 117, 161–162, 175 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 9x6 Index role of, 9, 31, 175 science supported by, 55n49 secular stagnation caused by, 31–32, 52–55, 53n45, 91, 173 self-seeking, 6–9, 12, 34, 43, 93, 141 services provided by, 37n3, 42n17, 54, 64, 98–101 size of, 8, 161–162, 166–167, 167n8, 170–171, 175 small democratic, 166–167, 167n8 Smith and, 37, 37nn3–4, 45, 45n27, 47n31, 52–53, 56 straitjacket, 52–55 teething problems of, 170–171 Third Way of, 14n6 wages and, 41 wasteful spending by, 98–101, 163–164, 164n2 weak leadership of, 123–125, 148 world, 72–73 grants, 44n25 Greece, 4n5, 84n33 Greenspan, Alan, 82, 124, 177 gross domestic product (GDP), 91, 128–129, 169–170 austerity and, 26 of China, 49, 49n37 exaggerated, 49, 49n37, 50nn38–39, 51n43 pre-crisis levels of, 13 of Soviet Union, 50n38, 51n43 “having your cake and eating it” proverb, 6–9, 6n12 Health and Human Service (HHS), 46n30 b1962_Index.indd 197 197 healthcare Affordable Care Act for, 33, 33n31, 46n30, 62n12, 97n1, 103–104 fraud, 66, 66n26, 164n3 mental, 164n3 Heraclitus, 34n34 HHS See Health and Human Service hidden inflation, 51–53, 168 in medical charges, 64, 64n20, 92 in Soviet Union, 50, 50n38, 51n40, 168n12 taxes and, 50n39 Hispanic retirees, 22, 25 Hitler, Adolf, 5n8, 143n4 Hoenig, Thomas, 114n9 hourly wages, 18–19, 21–22 household savings, 24–25 idealism, destructive, 141, 144 idealist paradigm, 152, 154 ideocracies, 48, 142–144, 170–171 IMF See International Monetary Fund inclusive economic theory as doublethink’s antidote, 151–152 governments and, 154 importance of, 6, 35, 151–154 insiders and, 151–154 introduction to, xi–xii sustainable prosperity framework and, 151–154 vicious cycles broken by, 155 India, 4, 70, 85n37, 87, 173n1 inequality global wealth tax to address, 32n30, 73n11 increasing, 68n32 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 198 Index in liquid wealth, 22n11 minimum wage and, 26, 28 Obama administration and, 40n12, 56n55 origins of, 19, 179 programs aimed at, 102 in racial wealth, 22, 22n11, 25 retirement and, 22, 24–25 in wage gap, 20–22 wealth concentration and, 102 infallibilist macroeconomic position, 138–139 inflation See also hidden inflation slow and stable, 81, 139 sound money and, 160–161 statistics, 132 infrastructure investment, 71n5 Ingsoc, 145–146 inheritance tax, 73n13, 159 insiders, 93, 180–181 See also privilege Affordable Care Act benefiting, 103–104 in democracy, 40, 40n14, 43–48, 51–53, 55, 56, 58–59, 158 doublethink and, 43n19, 69, 145–148, 152 evidence doctored by, 48–51 financial crises and, 55–56, 136 globalization and, 84–85, 179–180 inclusive economic theory and, 151–154 intentions of, 164–165 laws not violated by, 159 liberalization for, 69, 73–80, 73n13, 82–85 macroeconomics benefiting, 136 middle class and, 58, 93 b1962_Index.indd 198 9x6 pipe dreams of, 141–144 public concerns benefiting, 102–105 regulation enriching, 107, 125 resistance of, 174 self-seeking, 6–9, 12, 34, 43–45, 97–98, 141, 143, 162, 179 sovereign democracy and, 39–48 willful ignorance of, 97, 97n2 words instead of actions by, 97–105 insider trading, 108 insurance, 33, 33n31 interest rates, 29n15, 139 employment and, 13n4 Federal Reserve and, 3, 122n19, 125, 147, 173n1 short term, 81–82 intergenerational transfer strategies, 41n16 internal devaluations, 26 international adventurism, International Monetary Fund (IMF), 79, 177n4 internships, 21 investment, 49n37, 53, 104, 115, 122n19, 135 capital markets and, 117–118 chilled, 66, 66n28 infrastructure, 71n5 quick returns on, 41n15 Ireland, 4n5 irrational exuberance, 124 Islamic State of Iraq and Levant (ISIS), 93 Italy, 4n5 Japan, 14n6, 164–165 J C Penney, 68n32 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 9x6 Index Johnson, Lyndon, 34n36, 99 J P Morgan Chase Bank, 113 Kahneman, Daniel, 144 Kansas Trial Lawyers’ Association, 46n30 Kessler, Ronald, 180n1 Keynes, John Maynard, 32n29, 66n28, 82 on capital markets, 117–118 deficit spending supported by, 18n10, 128, 137–138 General Theory by, 137 macroeconomic theory popularized by, 18, 18n10, 128, 137–139 Krugman, Paul, 30n18, 67, 118, 141n1, 163 anti-austerity policy of, 8, 27, 47, 55 false science of, 31–35 secular stagnation and, 13, 14n5, 26–27, 29, 68 Smith and, 56 labor market participation rates, 13, 17–18 Laffer Curve, leadership motivations of, weak, 123–125, 148 legitimacy, 99, 143n4 Leibniz, Gottfried, 146, 148 leverage, 83n30, 122n19, 125 liberalization in China, 70–72, 75–77, 81, 87 in double movement, 69–70, 77 in EU, 75, 77–79, 77n22, 78n23 failure of, 179 b1962_Index.indd 199 199 global economic turmoil and, 69–85 globalization and, 69–80, 70nn1–2 for insiders, 69, 73–80, 73n13, 82–85 macroeconomic policy and, 80–84 in 1990s, 69–71 post-communist modernization and, 71–73 for privileged, 69–85 in Russia, 9, 74–77, 81, 87 in US, 75, 79–80, 82–83, 83n31 Light, Paul, 164n2 liquid wealth, 22n11, 114, 117 lobbyists, 34n35, 46n30 logos, 34n34 macroeconomics data in, xii, 128–129, 129n2, 131–132, 157 deficiencies of, 128, 131–134 defined, 128 dogmatism in, 137–141, 143–144 econometric results and, 128, 128n1 economists and, 127, 130–135, 138, 140 global economic turmoil and, 127–140 Greenspan and, 124 infallibilist position in, 138–139 insiders benefiting from, 136 liberalization and, 80–84 limited understanding of, 130–131 miasma of, 127–136 pliable, 139 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 200 Index policy prescriptions and, 131–134 politicians and, 127–128, 131, 133–135, 138 significance of, 128–129 stagnation and, 134, 139–140 usefulness of, 134, 140 macroeconomic theory absorption approach in, 6n13 Keynes popularizing, 18, 18n10, 128, 137–139 stimulation and, Malia, Martin, 48, 142–143 manufacturing, for export, 104 market communism, 70, 72, 76, 169n15 market competition, reform for, 159–160, 176–177 Marx, Karl, 37n4, 142–143 maximized sales, 167n10 Medicaid, 51n40, 164n3 medical charges fraudulent, 164n3 hidden inflation in, 64, 64n20, 92 Medicare, 46n30, 51n40, 60n5, 104 mental healthcare, 164n3 microeconomics, 129, 131 micro-lending, 94n3 middle class beleaguered, 58–64, 91, 92n1, 157 compression of, 64–68, 65n23 disappearance of, 65, 65n22, 68n32 disposable income of, 67, 67n31 French Revolution and, 57–60, 58n3, 63n17, 68 global economic turmoil and, 58–68 insiders and, 58, 93 b1962_Index.indd 200 9x6 as new working class, 59–61, 63n15, 64–66 productive, 60–61, 63–64, 66n28, 67n31, 73, 77, 89, 91–93, 146–147, 154, 157–158, 165, 165n5 stagnation and, 157 strengthening of, 157–158 taxes paid by, 59–63, 60nn5–6, 62n13, 63n15, 66–67, 157–158, 165, 165n5 as third estate, 57–59 Middle East, 93, 162–163, 180 middle income trap, 71n4 militarization, 87–89, 148, 162, 180 military deterrence, 162 minimum wage fallen, 64 inequality and, 26, 28 minority household savings, 25 missing workers, 17 modernization, post-communist, 71–73 monarchical–aristocratic state, 37n4 money easy, 29n15, 29n17, 66–67 sound, 160–161 monopoly, 52n44, 73, 114n9 mortgages, subprime, 33, 82, 100, 116 motivated blindness, 145, 145n1 national competitiveness, 30n18 national income accounts, 128 National Science Foundation (NSF), 44n25 NATO See North Atlantic Treaty Organization Necker, Jacques, 57 neoclassical economic theory, 20, 34, 133, 152, 154 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 9x6 Index neoliberalism, 38, 38n7, 69–70 neorealism, xii, 152–154 New Keynesian position, 81–82 1990s, liberalization in, 69–71 Nineteen Eighty-Four (Orwell), 43n19, 44, 145–146 non-aggression pact, 5n8 North Atlantic Treaty Organization (NATO), 162 North Korea, 51n43, 153, 170, 170n16 NSF See National Science Foundation Obama administration, 29, 53, 56n53 executive orders of, 32n27, 34n33 inequality and, 40n12, 56n55 petroleum and, 42, 42n18 promise zones of, 56n55 Obamacare See Affordable Care Act Office of the Comptroller of the Currency (OCC), 122n19 Organization of the Petroleum Exporting Countries (OPEC), 42–43, 42n18 Orwell, George, 43n19, 44, 57, 145–146 over-taxation, 147 Owen, Robert, 37n4 Pareto optimality, 30, 30n18, 152–153 Paulson, Hank, 110–111 pax occidentalis (peace on the west’s terms), 93 payroll taxes, 41, 63 peace on the west’s terms (pax occidentalis), 93 pensions, 26, 30n20, 65n23 Pentagon, 39n8 per capita income, 169–170 petroleum, 42–43, 42n18 b1962_Index.indd 201 201 phony-war stage, of financial crisis, 4n5 Piketty, Thomas, 32n30, 47n32, 73n11 pipe dreams, 169–170 big government and, 166–167 crisis prevention and, 141–146 political economy, 7, 12, 129 See also politocracy British, 47n31, 52, 52n44 new global, 45 of secular stagnation, 29–31 political favors, reform of, 159 political legitimacy, 99, 143n4 political opponents, 98 political process, reform of, 174 political strife, in global economic turmoil, 93 politicians campaign finance reform and, 174 doublethinking by, 145–147, 152 intentions of, 164–165 macroeconomics and, 127–128, 131, 133–135, 138 as public servants, 34, 44, 174, 181 salaries of, 65n23 spending by, 55, 66–67 transnational entities supported by, 79–80 politocracy, 66, 107 defined, 34 self-seeking, 6–9, 12, 34, 43–45 Popper, Karl, xii popular sovereignty, 44 Portugal, 4n3, 4n5 post-communist modernization, 71–73 21-04-2015 09:02:47 b1962 Global Economic Turmoil and the Public Good 202 Index post-crisis recovery alternative futures to, 13–14 stagnation in, 13–29 V-shaped, 3–4 poverty anti-poverty programs for, 11n1, 48n35, 99–100 in developing countries, 101 Fiorina on, 94n3 lost war on, 34, 34n36, 48n35, 98–101, 105 measuring of, 48n35 mitigation, 7n15 Obama administration and, 40n12, 56n55 reform for, 158 Republican Party and, 11 role of, 98–99 price indices, 132 Primakov, Evgeny, 8n16 private contractors, 54n47, 73, 73n13 private jets, subsidized, 56n53 privilege in French Revolution, 57–58 liberalization and, 69–85 shunned, 158–159 stultifying, 52 productivity changes in, 81 of middle class, 60–61, 63–64, 66n28, 67n31, 73, 77, 89, 91–93, 146–147, 154, 157–158, 165, 165n5 wages detached from, 19, 26 profit, over compensation, 20–21 promise zones, 56n55 propaganda, xii, 44 b1962_Index.indd 202 9x6 prosperity See also sustainable prosperity framework shared, 7n15 Smith’s formula for, 37 providence, 146 public awareness of, 174 concerns, insiders benefiting from, 102–105 federal debt held by, 175, 175n2 servants, 5n9, 34, 44, 174, 181 trust, in government, 58n4, 165, 165n4 Public Citizen, 122n19 Putin, Vladimir, 8n16, 40, 74, 76, 180 quantitative easing (QE), 29n17, 121 racial wealth disparities, 22, 22n11, 25 Rajan, Raghuram, 173n1 rational behavior, 5, 20 rational decision making, 153 rational-wishful thinking, 13 real estate, leveraged, 83n30 realist paradigm, 152, 154 reform affirmative action, 158–159 bank, 111–117, 122, 159–160, 176–177 campaign finance, 174 for competitive markets, 159–160, 176–177 current initiatives, 173 democracy and, 119 deregulation without, 123–124, 177 Dodd–Frank Act and, 119–120, 120n16 entitlement, 158–159 failure to make, 114–117 21-04-2015 09:02:48 b1962 Global Economic Turmoil and the Public Good 9x6 Index of financial industry concentration, 160 of foreign adventurism, 162–163 of government, 117, 161–162, 175 middle class strengthened by, 157–158 military and, 162 objectivity about world economy and, 156–157 of political favors, 159 political process, 174 for poverty, 158 privilege and, 158–159 prospects of, 173–177 rational decision making in, 153 regulation and, 111–117, 123–124, 176 response to crises undermining, 118–122, 120n16 return to sound money, 160–161 after 2008 financial crisis, 11, 118–119 vicious cycles broken by, 155–162 weak government leadership in, 123–125 regulation bailouts and, 109, 111, 111n7, 113, 116n14, 119, 120n16, 124 of banks, 107–117 capital markets and, 117–118 claims for, 110 Dodd–Frank Act and, 109, 111–113, 111nn7–8, 116n14, 119–120, 122n19 insiders enriched by, 107, 125 reduced, 176 reform and, 111–117, 123–124, 176 treadmill of, 107, 125 b1962_Index.indd 203 203 regulatory and rent granting apparatus, of EU, 78–80, 78n23, 79n25 Reinert, Sophus A., Republican Party, 8, 11, 24, 164n3 retirement crisis, 30, 30n20 401(k) for, 24, 26n13, 44n21 inequality and, 22, 24–25 penalties, 44n21 pensions and, 26, 30n20, 65n23 Rosenberg, Alexander, xii royalist political economy, 47n31 Russia, 4, 8n16 See also Soviet Union east–west polarization and, 87–89, 88n3, 162 failed stimulus in, 177n4 liberalization in, 9, 74–77, 81, 87 militarization in, 87–89, 148, 162, 180 pax occidentalis and, 93 political opponents in, 98 sanctions on, 7, 162 sovereign democracy in, 39–48, 174 salaries, 21, 64, 65n23 sales, maximized, 167n10 sales tax, 60nn5–6 sanctions, 7, 88, 162 Santoli, Michael, 65n22 savings, 24–25, 66n28, 118, 157–158 Schultz, William, 46n30 Schumpeter, Joseph A., Schwab, Klaus, 29n17, 69 science false, 31–35 government support for, 55n49 Sears, 68n32 21-04-2015 09:02:48 b1962 Global Economic Turmoil and the Public Good 204 Index Sebelius, Kathleen, 46n30 SEC See Securities and Exchange Commission second estate, 57–58, 62, 63n17 secular stagnation challenge posed by, 179–180 false science of, 31–35 governments causing, 31–32, 52–55, 53n45, 91, 173 Krugman and, 13, 14n5, 26–27, 29, 68 macroeconomic dogmatism and, 139–140 as misleading term, 91–93 pipe dreams and, 141, 144 political economy of, 29–31 sources of, 35, 69, 91–92, 154, 173 Summers and, 13, 14n5, 26–27, 29, 29n15, 68 Securities and Exchange Commission (SEC), 122n19 self-employment, 60n5 short term interest rate, 81–82 Simon, Herbert, 152n3 Singapore, 170 SIPP, 48n35 small banks, 112n8 small businesses, 64, 73n13, 121, 129n2 small democratic government, 166–167, 167n8 Smith, Adam, 51n42, 154 governments and, 37, 37nn3–4, 45, 45n27, 47n31, 52–53, 56 on prosperity, 37 rejection of, 37–38, 45 Wealth of Nations by, 12, 37, 37n4, 43n19, 52n44 b1962_Index.indd 204 9x6 socialism, 37–38, 37n4, 143, 145 Social Security, 26n13, 30n20, 60n5 social strife, in global economic turmoil, 93 soft ideologies, 48, 141–142 sound money, return to, 160–161 South Africa, South Korea, 81, 170, 170n16 sovereign debt increased, 4, 4n5, 12, 12n3, 29n17, 66–67, 125, 161 Republican Party and, sovereign democracy China and, 98 defined, 39–40, 40n11 in Russia, 39–48, 174 Soviet Union, 31n24, 38–39, 71, 147 GDP of, 50n38, 51n43 hidden inflation in, 50, 50n38, 51n40, 168n12 planning and supply administration in, 53–55, 54n47, 75–76, 80–81, 81n26 speculation, 115, 117–118, 122, 124, 160 stagnation See also secular stagnation avoiding, 97, 176, 177n4 macroeconomics and, 134, 139–140 middle class and, 157 in post-crisis recovery, 13–29 stimulus and, 13 in tech wages, 23 after 2008 financial crisis, 13–29 statistics analysis of, 132–133 inaccurate, 48, 48n35, 50n38, 53, 132, 157 inflation, 132 21-04-2015 09:02:48 b1962 Global Economic Turmoil and the Public Good 9x6 Index stewardship, 33n32 sticky wages, 18, 137 stimulus debates over, 133 failed, 177n4 macroeconomic dogmatism and, 138–140 macroeconomic theory and, overdose of, 92 risks of, 12 stagnation and, 13 in vicious cycle, 155 straitjacket government, 52–55 Stress Test (Geithner), 124 subprime loans car, 116, 116n13, 122 mortgage, 33, 82, 100, 116 Summers, Lawrence, 67, 118, 163 anti-austerity policy of, 8, 27, 47, 55 false science of, 31–35 on infrastructure spending, 71n5 secular stagnation and, 13, 14n5, 26–27, 29, 29n15, 68 Warren and, 40n14 supply concerns about, 56 globalization and, 75–77, 79, 81 laws of, 41–42 in Soviet Union, 53–55, 54n47, 75–76, 80–81, 81n26 technical efficiency and, 138, 138n6 supply-side reforms, 30, 30n21 Surkov, Vladislav, 40, 40n11 sustainable prosperity framework inclusive economic theory and, 151–154 lesser evil in, 163–171 b1962_Index.indd 205 205 prospects in, 173–177 vicious cycles broken in, 155–162 syndication, 115, 160 Taiwan, 169n15, 170 taxes assets unverified in, 63n16 due process in, 63, 63n18 estate, 62, 62n9 federal income, 60n6 fraud, 62n9 French Revolution and, 57, 57n2, 59–60 gift, 62, 62n9 global wealth, 32n30, 73n11 hidden inflation and, 50n39 incentives for businesses, inheritance, 73n13, 159 intergenerational transfer strategies, 41n16 lowered, 139, 157–158 middle class paying, 59–63, 60nn5–6, 62n13, 63n15, 66–67, 157–158, 165, 165n5 over-taxation, 147 payroll, 41, 63 sales, 60nn5–6 self-employment and, 60n5 Taylor, John, 14n5 Taylor, Michael, 46n30 TBTF See too big to fail TEC See Transatlantic Economic Council technical efficiency, 138, 138n6 tech wages, 21, 23 Thailand, 74–75 third estate, 57–60 Third Way, 14n6 Third World, 81, 101 21-04-2015 09:02:48 b1962 Global Economic Turmoil and the Public Good 206 Index Thurow, Lester, 14n6 too big to fail (TBTF), 109, 111n7, 112 Transatlantic Economic Council (TEC), 79, 79n25 transformation, 70, 70n2 transnational entities, politicians supporting, 79–80 Trans Pacific Trade Partnership, 79 2008 financial crisis, 6, 91, 139 causes of, 100, 107–108, 112–114, 117, 120–122, 124–125 New Keynesian position and, 81–82 reform following, 11, 118–119 stagnation following, 13–29 V-shaped recovery and, 3–4 Ukraine, 162 UNC Center for Slavic, Eurasian and East European Studies, 44n25 under-consumption, 32, 32n29 underemployment, 22 unemployment Affordable Care Act and, 62n12 BLS and, 129n2 high, 13–18, 14n7, 15n8, 22, 24n12 long-term, 155 maximum number of weeks of, 32n28 missing workers and, 17 in US, 13–18, 14n7, 15n8, 17, 22, 24n12, 32n28, 62n12, 129n2, 155 United States (US) abusive government of, 14n5, 32, 165 campaign finance reform in, 174 b1962_Index.indd 206 9x6 chronic budget deficits in, 165–166, 165n6 contracting by, 54n47, 73n12 core problems facing, 163 deficit spending in, 155–156, 161, 175 depressed economy in, 8n16, 92n1 east–west polarization and, 87–89, 88n3 entitlements in, 141–142 federal debt, public holding, 175, 175n2 freedom in, 92n1 Gini coefficient of, 170 globalization and, 75, 79–80, 180 infrastructure spending in, 71n5 liberalization in, 75, 79–80, 82–83, 83n31 lost war on poverty in, 34, 34n36, 48n35, 98–101, 105 macroeconomic miasma in, 127 national income accounts, 128 in 1990s, 70 pipe dream big government in, 167 prospects of, 174 sound money in, 160–161 unemployment in, 13–18, 14n7, 15n8, 17, 22, 24n12, 32n28, 62n12, 129n2, 155 urbanization, 104 US See United States utility, 151–152, 169 utopia, 143n5 Vietnam, 70–72 Volker Rule, 113, 116 Voltaire, 58n3, 146 V-shaped recovery, 3–4 21-04-2015 09:02:48 b1962 Global Economic Turmoil and the Public Good 9x6 Index wages See also salaries of college graduates, 21–22 under compensation, 19 decrease in, 64, 65n22 gap in, 20–22 government intervention in, 41 hourly, 18–19, 21–22 minimum, 26, 28, 64 productivity detached from, 19, 26 sticky, 18, 137 tech, 21, 23 working class, 18 Wall Street, 12n2, 102, 118 Warren, Elizabeth, 40n14 wealth concentration, 102 global wealth tax on, 32n30, 73n11 liquid, 22n11, 114, 117 racial disparities in, 22, 22n11, 25 Wealth of Nations (Smith), 12, 37, 37n4, 43n19, 52n44 Weber, Max, 31n25, 143, 143n4 b1962_Index.indd 207 207 welfare, 8, 48n35, 165n5 Wen Jiabao, 46n29 White, Mary Jo, 122n19 willful ignorance, 97, 97n2 Woolsey, James, 42n18 workers, missing, 17 working class middle class as, 59–61, 63n15, 64–66 wages, 18 World Bank, 7n15, 80 world government, 72–73 World Trade Organization, 88 World War II, 91, 118 Wyly brothers, 62n9 Xi Jinping, 46n29, 74 Yellen, Janet, 5n9, 122n19, 139, 141n1, 161 Yeltsin, Boris, 75–76 Yugoslavia, 71–72 Zero Lower Bound, 13n4 21-04-2015 09:02:48 ... Economic Turmoil and the Public Good 12 9x6 Global Economic Turmoil and the Public Good causes of global economic growth retardation and the risks of perpetual fiscal and monetary stimulus The conversation... of the article “We can help to make the world a better place” b1962_Ch-01.indd 21-04-2015 08:52:07 b1962 Global Economic Turmoil and the Public Good 9x6 Global Economic Turmoil and the Public Good. .. 08:52:07 b1962 Global Economic Turmoil and the Public Good 9x6 Global Economic Turmoil and the Public Good America has been anemic, and concern is mounting about a fresh financial crisis.3 The BRICS