A few weeks ago, the Globe and Mail reported that Trudeau and his Liberals are listening to Lawrence Summers’s idea of “inclusive prosperity.” I suppose this could be dismissed as another attempt by Justin Trudeau to appear as if he’s a deep thinker and it should be. While Trudeau’s insistence that the Liberals will reveal their platform as the 2015 election nears isn’t problematic — election platforms aren’t something that should be treated nonchalantly given the nature of politics — it is nonetheless incredible that after being the leader of the Liberals for the past two years, the public should have some conception of what the Liberals want to do. Finding a unicorn while blindfolded seems easier at this point. In any case, the gist of Summers’s “inclusive prosperity” is as follows: rather than pursuing lower taxes and balanced budgets, governments should instead focus on investing in infrastructure, fight climate change, and invest in education. Who would be against this? Well, I would be against it given who authors inclusive prosperity.
Lawrence Summers has held a number of impressive posts during his career. However, the policies that he has pushed have been anything but inclusive. As Treasury Secretary from 1999 to 2001, Summers was the guy in the Clinton administration who ripped up the Glass-Steagall Act, thereby allowing commercial and investment banking to come together, further deregulating American financial markets. The follies of Summers’s act was clear by 2007 when the American economy began to implode and US banks got into hot water thanks to their insistence that the sub-prime mortgage securities that they were both buying and selling — thanks to Glass-Steagall’s death since they wouldn’t have otherwise been allowed to sell securities of any sort — were perfectly fine. Had Glass-Steagall stood, the US banking system may have been sounder than it was by that point, a liquidity crisis may not have emerged to the extent that it did, the US and many other economies may not have experienced a pointless recession, and the potential for foreseeable sluggish economic growth may not have happened. Still, Summers’s decision to repeal Glass-Steagall had a more subtle but no less insidious effect: the further financialization of the US economy. The consequences of financialization for American workers cannot be overstated. Anything and everything was looked at as a liquid asset and the relentlessly short-term orientation of a financialized economy deepened throughout the US economy. Bankers’ solutions for generating profits are fairly simple and very narrow-minded: cut labour costs or raise prices. In the highly competitive American marketplace, the choice is often the former. A lot of perverse incentives to make money materialize under highly financialized economic environments too. Profitable and productive companies are worth more if they are dissected and destroyed. Companies that should go under because they are effectively dead wood become highly valued because the promise of revived profitability offers excellent returns. In effect, the paradigm that Summers helped shore up is one of an abused workforce who has to perpetually ratchet down their expectations because they labour in an economy that values unproductive finance over industry. How these circumstances open the door to inclusive prosperity is about as clear as mud.
Investing in infrastructure, fighting climate change, and investing in education — whatever “investing in education” is supposed to mean — are all long-term solutions for an economy that is oriented to the short-term. How does “inclusive prosperity” propose to occasion a paradigm shift? It doesn’t! Inclusive prosperity assumes that tacking these measures onto the existing paradigm will magically improve people’s lives. At best, inclusive prosperity is an easy slogan that avoids answering the hard question of how to put an end to a destructive paradigm that relies on inequality to generate growth. To be sure, the 2008 economic meltdown bucked the trend of everyone’s income falling during a recession as only top earners saw their incomes rise. That this actually happened indicates something is seriously amiss with how economies now operate. For Trudeau to import and consider the ideas of a man who helped deepen inequality is a clear demonstration of his lack of imagination. Then again, the reason why he would do so was already given earlier in this paragraph: inclusive prosperity is an easy slogan that avoids answering the hard question of how to put an end to a destructive paradigm that relies on inequality to generate growth. Perhaps, then, Summers’s inclusive prosperity is perfect for Trudeau: since it says absolutely nothing, expect it to do absolutely nothing.
Critical Canadiana 