Short Courses from Top Economists on Financial Collapse & Inequality

New Orleans   

How about “economics for idiots” for all of us out there who might have trouble remembering what we have learned from the Great Recession as well as the Bush “build the rich” program of recent years?  Thanks to the Times we have this today in easy to access fashion.

 

 

Here’s Alan S. Blinder, the Princeton professor and former Federal Reserve vice chairman’s “10-step recovery plan:”

  1. Remember that people forget
  2. Do not rely on self-regulation
  3. Honor thy shareholders
  4. Elevate risk management
  5. Use less leverage
  6. Keep it simple, stupid
  7. Standardize derivatives and trade them on exchanges
  8. Keep things on the balance sheet
  9. Fix perverse compensation
  10. Watch out for consumers

Here’s Joseph Stiglitz, Columbia professor and Nobel laureate, on how inequality is preventing financial recovery and growth.

  1. Weakens the middle class and their ability to drive the economy with consumer spending.
  2. Hollowing the middle class means that they are unable to invest in their future, by educating themselves and their children and by starting and improving businesses.
  3. Weakening the middle class is “holding back tax receipts” which means that “the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.”
  4. Inequality is associated with more frequent and more severe boom-and-bust cycles.

Now if we could just get people to learn these lessons….

Locating Housing for the Poor: Good Intentions, Expediency, and Living with the Consequences

Robert Moses, seated at left in 1959, used his position as head of the Mayor's Committee on Slum Clearance to mass-produce thousands of units of public housing, often near the shoreline.

 Quito    One of the ironic outcomes of recent disasters, whether New Orleans or now New York, is that the public, policy makers, and politicians are finally forced to reckon with where the poor are, and often, where they have put the poor in ways that are hard to escape.  In a smaller way this is true of politics and elections as well, as we have recently seen in the sudden realization of the Republican Party that there are a whole, whopping lot of people out in America that don’t look or think like them.   Like disasters, democracy is an equally transforming experience, as I am also seeing daily in Quito and throughout Ecuador, as new and old parties try to calculate their appeal and power in places they do not know and with people they do not completely recognize because they are foreign to their daily experience.

In New Orleans ignoring the failure of public protection and the levee system, many areas that flooded were in places like the 9th Ward where land had at one time been cheap enough to allow African-American families to buy and build or where swamps had been filled sufficiently to allow developers to create cheaper land for housing expansion as the city grew.  In Quito or Mexico City or Lima, poorer and lower waged workers, immigrants, or migrants moved to where there was land, squatted, and tried to make the best of it, until cities were slowly forced to deal with the burgeoning populations and politicians were forced to figure ways to deliver to leverage their support. 

In New York an interesting piece today in the Times, “How the Coastline Became a Place to Put the Poor,” by Jonathan Mahler, looks at the role of legendary power broker and public developer, Robert Moses.

The Rockaways were irresistible to Moses. Once a popular summer resort for middle-class New Yorkers, who filled its seaside bungalows and crowded into its amusement parks, the area had fallen on hard times when cars, new roads and improved train service made the beaches of Long Island more accessible.

Never one for nostalgia, Moses saw the Rockaways as both a symbol of the past and a justification for his own aggressive approach to urban renewal, to building what he envisioned as the city of the future. “Such beaches as the Rockaways and those on Long Island and Coney Island lend themselves to summer exploitation, to honky-tonk catchpenny amusement resorts, shacks built without reference to health, sanitation, safety and decent living,” he said, making his case for refashioning the old summer resorts into year-round residential communities.

What is more, the Rockaways had plenty of land that the city could buy cheaply, or simply seize under its newly increased powers of eminent domain, swaths big enough to accommodate the enormous public-housing towers Moses intended to build as part of his “Rockaway Improvement Plan.” Though only a tiny fraction of the population of Queens lived in the Rockaways, it would soon contain more than half of its public housing.

In fairness of a sort, Mahler even concedes that maybe some of these re-locations might have not just been based on cheap land and eminent domain, but even “good intentions,” citing the efforts of Mayor Fiorello LaGuardia to clean up the slums on New York’s Lower East Side, pushing new housing towards the waterfront, which also flooded in the wake of Hurricane Sandy.

What interests me is not that plans go awry over time, that good intentions can create their own hells, or that concentrated high rises for the poor, the old, the infirm, and the challenged can re-ghettoize areas into new wastelands “…without reference to health, sanitation, safety and decent living” in the earlier words of Robert Moses, but the inability of governments, politicians, and the public to abandon their nostalgic notions of what they had hoped might be developed when they pushed the poor out of sight and fully meet the challenge of resolving the handiwork of earlier decisions and their consequences.  Without a doubt, cheap land is going to attract poorer families and poorly funded public works.  This is simply reality, regardless of the intentions, so let’s get past that.

The real problem is that whether governments push people there as in New York City or turn their heads and finally find them there in New Orleans, Quito, Lima, Mexico City, and thousands of other cities, small and large, ignorance of the government is not bliss, and the challenges created by reality have to be faced.  For want of a better way to say this, if housing is going to be separate, at least citizens and families have to be assured that it is equal.  Services have to be provided.  Transportation has to be affordable and accessible.  Jobs and work locations have to have incentives to move nearby.  Decent retail outlets have to be located in accessible areas and subsidized if necessary to ensure success.  Public schools, police, fire, health clinics and hospitals have to be built, supported, and guaranteed to perform at the same or better quality as provided anywhere else in the government’s jurisdiction.

The social contract between government and citizens cannot guarantee that there will never be mistakes or that perfection is possible, but has to warrant that every effort will be made to create equity and in simpler terms, to fix whatever is broken.  Ironically, doing so not only provides more citizen wealth, city stability and security, but on the long run saves money as countless studies have established.

Democracy encourages us to not avoid the messes we create and the problems around us because it allows people to have a voice and creates occasions where these voices cannot be ignored or silenced.  Disasters by definition are terrible and force us to stop ignoring the precarious problems we have created and reckon with the largeness of our “community” in terms of morality and human rights, easily swept aside in the hurry of everyday lives, but now no longer invisible, and recommit to the minimum standards that must be equitably guaranteed to all.

Land use is a public decision and commitment, not a matter of fate and possible fatality.