3 Political Economy 202

Principle #1—and it’s first for a reason—emphasizes the role of power in economic outcomes, a role that gets virtually no attention in formal economics training. Yet, as stressed throughout these pages, the power to steer economic goodies your way is at the heart of our most fundamental economic challenge: the growing gap between overall growth and most families’ living standards. Imbalanced economic power is at the heart of the crunch.

In this country more than any other advanced economy, when you’re talking about power, you’re in spitting distance of politics. Thus, it’s not enough to be an economist—to know the rules of economics. You’ve got to be a political economist: You must know how the rules of economics interact with the power structure of politics.

I’m not simply talking about lobbyists’ tweaking legislation their way, or the congressperson who gets the “pork projects” for his or her district (that is, wasteful spending projects that line pockets back home), though of course that’s no small part of understanding the intersection between politics and economic outcomes. I’m talking about political economics that goes on beneath the radar—which is where most of it takes place.

And what’s going on is simply this: Critically placed persons are structuring government practices, policies, and philosophies to meet their economic agenda. What makes up that agenda depends on who’s running the show. But for the past few decades—and note, this is not simply a George W. Bush critique—that’s largely, though not always, been an agenda with two parts: (1) to unleash market forces from the alleged handcuffs of regulation, and (2) to redistribute wealth and power to those at the top of the wealth pyramid.

I wrote about this (d-)evolution in my last book, under the heading of YOYO economics. That’s an acronym for “You’re on your own,” and it embodies a political philosophy that got us in our current mess. Under YOYO economics, the sole plan to meet any economic challenge we face, from globalization to health care, is a tax cut, a private account, and a solid push off the plank into the deep and murky waters of competitive market forces, where “you’re on your own” to sink or swim.

Operating in this mode leads its proponents to oppose worthy ideas that strengthen the diminished bargaining power of most working persons— ideas like minimum wages; a level playing field for those who would organize unions; a universal, nonmarket-driven approach to health care and pensions; progressive taxes; and less porous safety nets. Each of these ideas strikes at the heart of YOYOism, as they seek to pool the risks of economic insecurity over large groups of people, while unifying less advantaged groups under a WITT (“We’re in this together”) agenda.

The point is that a WITT agenda obviously leads to a very different political economy than does a YOYO agenda. In fact, the history of economic policy is nothing more than a ride up and down this continuum. As I write these words, the failure of YOYOism to meet the challenges of globalization, the growing health care crisis, not to mention category five hurricanes, has the YOYOs on the ropes. And presidential candidate Hillary Clinton, an avowed centrist, mind you, is explicitly critiquing YOYOs and articulating WITTicisms:

. . . the administration’s theory about how we should manage our economy: leave it all up to the individual.

That’s why they want to privatize Social Security and let individuals bear the risks. It’s why their answer to the health care crisis is limited to creating [a] health savings account, which allows the healthiest people to get the best deal, with little concern if the sickest get worse.

They call it the ownership society. But it’s really the “on your own” society. . . .

It’s time for a new beginning, for an end to government of the few, by the few, and for the few, time to reject the idea of an “on your own” society and to replace it with shared responsibility for shared prosperity. I prefer a “we’re all in it together” society.

We may be poised—I’m confident that we are—to start moving down the continuum away from YOYO toward WITT. This cannot occur, however, if the YOYOs are dictating the terms of the debate. In what follows, I address some of their most common arguments and objections to a new political economics, one based on the WITT agenda. Needless to say, I find them wanting, which is a nice word for “lame.”