Right now, the economy isn’t working for most of us. It isn’t surprising, because right now our society is shaping our economy based on the values of big corporations and the rich.

We don’t really see it, because of a sleight-of-hand/shell game our society plays. We pretend that most of us only want the government to play a small role in the economy — that’s how we end up with “keep the government’s hands off my Medicare” — and we pretend that political power plays a small role in the economy.

If we want a future where country worth fighting for, we need to stop playing these games and start talking about how to get an economy that’s based in our values. To do that, we need to answer 3 questions:
What values should shape our economy?
Who gets to decide?
How do we translate our values into the real world?

What
Stack the Odds In Favor of the Good Guys
Get Real: making tough decisions (versus NIMBY-ism)

Who (Power)
Democracy = everybody should have a real say
But voting isn’t enough. To have real democracy, we need to deal with power
Checks and Balances
You Haven’t Succeeded until It’s Politically Sustainable
Get Real: Confronting Conflicting Interests (versus carbon tax folks)
Mobilize over “Pony up”

How
No Magic Wand — free-market cheerleaders say “government bureaucrats can’t be smarter than the market.” But any intervention, including “market-based” solutions, runs into the same problem.
We Aren’t As Smart As We Think We Are
So what do we do?
Create/nurture markets
Make it easy (a.k.a., people & organizations aren’t calculators)
Ban some actions
Feedback loops & hold people accountable (e.g., Wall Street and creating good jobs)

NOTE: This post is mostly for me — to help me get this next step out of my head and put it down on paper — so I’m using a lot of shorthand that may not be clear. Once I’ve got a better idea of what I’m really arguing, I’ll spell it out so it’s easier to understand.

Introduction
Our debate about the economy the economy is shaped by 3 myths that tilt the playing field in favor of the values of people with power — big corporations and the rich. If we stop believing these myths, we can develop an alternative way of talking about the economy that could give everyone a real say in choosing the values that shape our economy.

J. P. Morgan declared that top executives’ compensation should be capped at twenty times the wage of an average worker. However, unless all organizations adopt this rule, capping an executive’s wage will put a firm at a competitive disadvantage.

For instance, consider the case of Whole Foods Market Inc. In the 1980s, the salary of its CEO was pegged at 8 times the pay of the average worker. However, when its executives were persistenly made strong offers by its competitors, Whole Foods Market relented and raise the cap on executive compensation to 19 times that of the average worker. Other firms, such as Ben & Jerry’s, Herman Miller Inc., and Costco Wholesale Corp., that have tried to implement similar strategies of capping executive excess have also had limited success.

That said, it is worth noting that the success that many major baseball and other sports leagues have had in imposing a limit on their teams’ salaries is impressive. If businesses were to emulate them and simultaneously adopt such a policy, they may be more successful at limiting executive pay.

In other words, For Some Choices We’ve Gotta Choose Together.

Creating a Values-based Economy

A. The way we usually talk about the economy is based in denial of 2 crucial facts:

1) The government is massively involved in the inner workings of the economy.
2) Power also massively shapes the economy.

This denial tilts the playing field towards people with power — big corporations and the rich — by stacking the odds in favor of their values:

• If we don’t acknowledge the massive role government plays in the economy, we won’t have a real conversation about the values we should encourage, so people with power are more likely to call the shots.
• This denial lets them shape what is vs isn’t counted as “government.” Example: if Medicare becomes too popular to touch, we go from “Medicare is Socialism ” to “keep your government hands off my Medicare “

What if we stopped being in denial?
Then maybe everyone could get a real say in which values shape the economy.
(a.k.a. democracy)

B. In practice, what would that look like?

To figure it out, start with Krugman’s critique of “command and control”: “direct regulations,” or laying out in detail “what will or will not be permitted,” works for some problems, but not for many:

• It’s impossible to think of every exception
• It doesn’t allow for flexibility
• It doesn’t unleash people’s and organization’s creativity

So, how do we give everyone a real say in which values shape the economy in a way that encourages flexibility and creativity?

1) Stack the Odds in Favor of the Good Guys
Shape government intervention in the economy so it creates an environment that supports and encourages our values.

• Can use incentives, but not a simpleminded “put a price on it and it’ll all work out” approach — People aren’t Calculators
• Can use markets, but it’s one of many tools, not the entire toolkit

2) Everybody Gets a Real Say (Power and the Economy)
Reshape power in the economy so that:

• Everyone has a real chance of having a say in which values shape the economy
• The system supporting our values is sustainable — it isn’t easily undermined by powerful actors.
• What happens when it isn’t: the 1990’s Wall Street “deregulation” that led to our financial meltdown

How we make it happen:

• Checks and Balances
• Instead of individual action — e.g., “if we all just pony up” — mobilize folks to choose and act together
• Deal with complexities of power & compromises instead of playing the game, “I’m pure and corporations are evil”

3) We Aren’t As Smart As We Think We Are
Market cheerleaders: “government regulation/bureaucrats can’t be smarter than the market — the economy is too complicated.”

Reality: market-based solutions run into the same problem — e.g., cap and trade

If there’s no way to get it just right right, then we need a framework for handling the uncertainty:

• A little humility — acknowledge we aren’t as smart as we think we are
• Accountability — e.g., if banks are supposed to be helping to create good jobs, make sure they actually are
• Feedback loops
• Get Real: we can’t get everything we want — choosing values is usually about making trade-offs

A few thoughts about this framework:

The Intro

• Not light and frothy like the Game metaphor
• But not as snappy as “the middle class was no accident“
• Maybe use a metaphor to describe the denial and its impact?
• Maybe reorder the beginning so I start with values rather than with denial? I can do that easily with government intervention, not sure how to do it with power

The Mechanics

• With some fleshing out, I buy the argument made in the individual pieces.
• But it still needs more powerful language and a much clearer connection with the intro. At this point, feels disjointed.

Where Next?

Maybe revisit the idea of market-based versus values-based framework. If I can combine some of the energy of that piece with some of the pieces from this brain dump, it might take me to the next step.

In the words of lobbyist Lauren Maddox, “The policy process is an extension of the market battlefield.”

The answer is not necessarily found in broader or stricter “ethics rules” barring specific gifts to politicians. Such rules may have little effect and will not, on their own, restore public trust. Instead, we need to consider how to prevent high-stakes market competition from intruding on political decision-making, to create what might be considered “safe zones” where the market has no influence.

I don’t have a problem with the changes Reich wants to make — public financing, slowing down the revolving door between public service jobs and corporate jobs, etc. But wishing for “safe zones” makes about as much sense as wishing for unicorns (or safe zones patrolled by unicorns).

Take the last healthcare fight. Reich writes:

Doctors squabbled over whether primary-care physicians would get a Medicaid payment boost or a somewhat smaller boost would go to all doctors. Insurers that specialize in higher — cost plans mainly going to unionized companies squared off against those specializing in plans that cater to lower-wage workers on whether taxes should be raised on high-cost plans and at what level the tax would kick in. Middle — sized companies fought against small employers over the size of businesses that will be exempt from the requirement of insuring their employees. And on and on.

Many of these battles continue but have moved into the regulatory process, where different companies, sectors, and industries are seeking rules that advantage them and disadvantage their competitors.

As opposed to when? The only reason we had any chance of a real debate this time is that the Godzilla of the medical world, the AMA, had its monopoly of power broken by the insurance companies a few decades ago. Case in point: from the New York Times in 1965.

The American Medical Association said today that it was placing an advertisement in 100 newspapers to make its position clear on its opposition to health care reform. The advertisement calls health care reform ‘the beginning of socialized medicine.’

What was the AMA trying to nuke? Medicare.

Healthcare is a particularly good case because even if, for example, somehow you magically created a public debate “safe zone,” Big Pharma would still have plenty of indirect influence over it. Remember this charming story from the New York Times last year?

A growing body of evidence suggests that doctors at some of the nation’s top medical schools have been attaching their names and lending their reputations to scientific papers that were drafted by ghostwriters working for drug companies — articles that were carefully calibrated to help the manufacturers sell more products.

I’m not arguing we couldn’t rein in some of the insanity. But it’s ridiculous to that we can treat market power like it’s a stain on public discourse.

In fact, I think this denial makes the problem worse. By pretending that power isn’t an inextricable part of the economy, we undermine building support for the real solution — insuring everyone has a real say by creating Checks and Balances .

This isn’t BP’s or Transocean’s fault. It’s not the government’s fault. It’s my fault. I’m the one to blame and I’m sorry.

It’s my fault because I haven’t digested the world’s in-your-face hints that maybe I ought to think about the future and change the unsustainable way I live my life. If the geopolitical, economic, and technological shifts of the 1990s didn’t do it; if the terrorist attacks of Sept. 11 didn’t do it; if the current economic crisis didn’t do it; perhaps this oil spill will be the catalyst for me, as a citizen, to wean myself off of my petroleum-based lifestyle.

‘Citizen’ is the key word. It’s what we do as individuals that count.

For those on the left, government regulation will not solve this problem. Government’s role should be to create an environment of opportunity that taps into the innovation and entrepreneurialism that define us as Americans….

Here’s the bottom line: If we want to end our oil addiction, we, as citizens, need to pony up: bike to work, plant a garden, do something. So again, the oil spill is my fault. I’m sorry. I haven’t done my part. Now I have to convince my wife to give up her S.U.V.

I’ve got a question for Mykleby. Does he think folks who live in New York City are more patriotic or better citizens than the folks in South Carolina?

After all, almost nobody who lives in New York City owns a car let alone an SUV. They don’t live in oil-guzzling McMansions. And they have a much smaller carbon footprint.

Actually, it’s worse than that. If Mykleby thinks the “terrorist attacks of September 11″ is one of “the world’s in-your-face hints” to “change the unsustainable way I live my life,” then isn’t he coming scarily close to saying that New Yorkers sacrificed blood because of South Carolinians oil addiction? And what does it say about South Carolinians that nine years after New Yorkers’ terrible sacrifice, South Carolinians are still guzzling oil?

If you asked Mykleby these questions, he’d probably say, give me a break (or something more colorful). New Yorkers didn’t pony up, it’s just really easy in New York City to get around without a car.

And that’s the point that a lot of very sincere, patriotic folks like Mykleby — and many touchy-feely environmentalists — aren’t willing to face. If most folks live in communities where it’s hard to get around without a car, telling them it’s their fault and they need to pony up is pretty much guaranteed to get us nowhere. That’s the reason nine years after 9/11 we are still hopelessly dependent on oil.

What we do as individuals does count. But it’s as citizens deciding to fight together for a common future — e.g., creating 20-minute neighborhoods — not as individuals deciding whether or not to bike to work, that will determine whether we continue to be addicted to oil.

Rugged Individualism
The entrepreneurial spirit of the individual that continues to solidify Texas as a world economic power….

Honest Compassion
A society assisting those in need rather than a government trying to solve every problem by just throwing more money at it.

But I was surprised at some of the language that did work for me. For example:

Opportunity For All
The opportunity to chart one’s own course start a business, chase a dream, or build a life regardless of gender, race, or religion.

The most interesting piece was on Limited Government:

A government that promotes policies to unlock individual potential and unleash economic growth. Government that does not try to be all things to all people.

It’s a clever way of trying to have it both ways. They admit government plays a critical role. And who other than Stalin would say government should be all things to all people?

In contrast, although the Oregon Republican Party talked about individuals — “Our political party has a common belief of personal freedom” — when it came down to brass tacks, they came down in a very different place.

Protecting our environment

Oregonians share a common interest in protecting the scenic beauty and livability of our great state. The Republican Party believes there is a balance between the environment and our natural resources. Healthy sustainable forests leads to a vibrant wood products industry that provides family wage jobs. Clean water flowing in our rivers and ocean estuaries benefits us all through tourism, recreation and fisheries industry jobs. We must use a common sense approach to balance these issues.

A nice job of saying they care about the environment without saying much else.

The one thing that struck me after reading a bunch of these sites is that using language like “choice” is a bad way to go. Although making choices can be one of the most profound things we do, it’s easy to end up sounding trivial, like deciding between Cheerios and Raisin Bran. These sites don’t make that mistake. When they talk about choice, they use much more powerful language, such as “unlocking individual potential” or “chart one’s own course” or “personal freedom.” Something I can definitely learn from them…

A more democratic economy is an economy where the major stupid decisions you have to live with are ones you helped to make.

The case I’ve laid out over the last six posts is not an argument against using markets as a tool. As I’ve said, for example, despite all the problems with cap and trade it’s certainly possible that this usage of markets could be an important piece of a larger solution. What I’ve been arguing against is the idea of using a market-based framework.

I think it’s also important to be clear that I’m not arguing that many of our solutions won’t be embedded in or operate alongside of a market. They will be — and so would an approach that relied primarily on regulations.

I’m still struggling with defining what exactly a values-based framework is. But after playing with values-based vs. market-based frameworks for a few weeks, I think it has some real potential. And making the comparison sets some useful boundaries on the scope of what I’m trying to do — which is a really good thing when tackling something this complex.

Finally, I think my first draft of a values-based framework gets around one of the issues I have with some of the other attempts to put values at the center of talking about the economy. These approaches often get off to a strong start, but they run out of gas/bio diesel pretty quickly; they don’t do a good job of handling the inherent challenges of acting on our values in something as complex as the economy.

All in all, not a bad “stumbling towards.”

One of the fundamental principles underlying a market-based framework is that through consumer choice, everyone gets a say. Some bureaucrat doesn’t decide what shoes you get to wear, you do. If you decide hot pink ballerina slippers or combat boots — or hot pink combat boots — best express who you are, you get to make that call. If you have the cash, that is, and if it’s profitable for someone to make hot pink combat boots. For this kind of freedom, the argument goes, the market is pretty effective.

But as Krugman said in Building A Green Economy, there are limits to how much real freedom markets can provide for all.

Now, efficiency isn’t everything. In particular, there is no reason to assume that free markets will deliver an outcome that we consider fair or just. So the case for market efficiency says nothing about whether we should have, say, some form of guaranteed health insurance, aid to the poor and so forth. But the logic of basic economics says that we should try to achieve social goals through “aftermarket” interventions. That is, we should let markets do their job, making efficient use of the nation’s resources, then utilize taxes and transfers to help those whom the market passes by.

The “aftermarket” approach runs into two problems. The first is what almost happened in Chula Vista. In Chula Vista, the fuel plant’s owner planned on spewing toxins close to folks’ homes and their kids’ schools. Doing something about it afterwards would be too late. And although there was a city plan that should have protected these folks, the owner of the fossil fuel plant simply ignored it He knew that unlike my or Krugman’s neighborhood, politicians wouldn’t crush him. He figured these folks didn’t have enough political power to protect themselves.

We can see the same market calculus at play with BP. BP figured it didn’t have to worry that not paying enough attention to safety would wipe out the company, because in 1990 Big Oil got Congress to cap their liability at $75 million (although there’s a chance there may be a way around the cap).

The same is true for the finance industry, which back under Clinton managed to gut the rules stopping them from taking insane risks without getting rid of their bailout safety net.

In short, a market-based framework gets into trouble because it doesn’t take power seriously enough. It pretends that power isn’t at the heart of markets, that it isn’t central to the shaping of markets. It doesn’t deal with the critical question, who gets to define what counts as “efficient”? One person’s market “failure” may be another person’s market success.

That’s also why many folks who are fans of the market-based framework end up proposing fairytale solutions. Take people like Tom Friedman, who says the best way to stop the climate crisis is create a carbon tax and then let the market do its magic. Even if the word “tax” wasn’t political suicide for Republicans now, there is no way a carbon tax large enough to do any good will happen in the US. Suburban folks who live far from their jobs and rural folks will stomp any politician who votes for it because it would devastate their lives.

A values-based framework puts power at the center. If you’re going to talk about what values should shape our economy, you’ve got to talk about who gets to decide which values. And if you believe in fairness and justice and freedom, that leads you to say, everybody should have a real say.

There are some great side benefits to this approach. If you empower many voices, more likely to explore a broader range of solutions. It also acts as a check on policy mistakes — if everyone has a real say, it’s harder to hose people.

Mind you, figuring out what “everybody should have a real say” means isn’t always straightforward. You could probably get most Americans to agree, big corporations shouldn’t be the ones who get to make all the big decisions — few people would argue the fuel plant’s owner should have been able to run over the folks in Chula Vista. On the other hand, I don’t want to live in a world where every decision is ground through a never-ending series of neighborhood community meetings. It’s hard to see how you end up with a world filled with interesting startups if you did. Ditto for NIMBYists, who essentially argue that people who live in a place today have veto power over the people who might live there tomorrow.

But pretending the complexities of power in the economy don’t exist doesn’t make them go away. All that gets you is the crazy, dysfunctional mess we have today. Better we own up to the difficulties and stumble towards a better answer.

Up next: conclusion