OPEN UNIVERSITY JUNE 11, 2008
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Thirty-six hours ago, on our annual trek to our summer residence on Tybee Island, Georgia, my wife and I stopped at a Comfort Inn in Dandridge, Tennessee, a few miles west of the Great Smoky Mountains. For dinner, we ate very well and very cheaply (for both of us, under $30.00 including a 30-percent tip) at a Perkins restaurant. Around us were tables full of contented, obese patrons, many of whom left with cartons of leftovers.
A few days before, I'd seen on the CBS Evening News a vignette from another small Tennessee town, Dover, on the other side of the state, near Nashville. This featured the distribution of boxes of free food to hundreds of ordinary looking, mostly white people of all ages, the boxes handed over by volunteers who looked much like the recipients. Interviewed by a reporter, the latter said that they were both humbled and grateful, but there was also a sense that something was wrong. They were all workers, hard workers; some held two jobs. They'd been overwhelmed by the prices of food, gasoline, and newly- revised mortgage payments. These food distributions were a matter of life and death. There were two terrible worms in this charitable apple: (1) Many applicants were habitually turned away every distribution day and (2) this was the last of the distributions: Tennessee had run out of the funds which purchased the food.
I'd put away my turkey, stuffing, cranberry sauce, hash-brown potato casserole, salad, fresh strawberry pie, and coffee--part of my mind on those decent-looking and -talking Tennessee men, women, and children hoisting the boxes of free food. I thought, "Is this the Irrawady Delta of Myanmar, the Zimbabwe of the monster Mugabe, the post-quake Chinese villages, New Orleans in the days after Katrina? No, this is fat old USA," and though, as we ate, the unemployment rate leaped ahead to 5.5 percent, the price of oil soared another 11 dollars a barrel and the stock market plunged 394 points (the stale participles constitute the tragic basso rilievo of these days), most of my colleagues and friends were doing, as usual, pretty well. Yes, I'd been paying close to four dollars a gallon for our Toyota's fuel, but days earlier I'd received from my few shares of Exxon and Conoco what amounted to half of my first year's salary as an instructor at Connecticut College for Women back in 1954-55, $3500, on which I somehow supported four people.
But something is rotten in the state of Tennessee, something seriously wrong in the good old USA.
Now here at Tybee, on the table next to my bed is a fat paperback edition of Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations with a fine introduction by my friend, Alan Krueger, the prize-winning Princeton economist. Krueger quotes Smith: "It is but equity that they who feed, clothe and lodge the whole body of the people, should have such a share of their own labour as to be themselves tolerably well-fed, clothed and lodged." And the great champion of the free market's power supplied a sort of solution to the defunded misery of the Dover distribution: "It is not very unreasonable that the rich should contribute to the public expense not only in proportion to their revenue but something more than in that proportion."
My 30 percent tip in Perkins did not suffice. My support of stockholder proposals, which the directors (against whom I habitually voted) suggest be voted down, did not suffice.
Is the solution above my pay grade, not part of my JD ("job description," as Maria Sharapova explained after her exit from the French Open to crowd boos when reporters asked why she was disliked)? Not really. My puzzlement and anger at the Dover hunger line lead to this blog post and to questions about solutions to its readers including my economist friends Krueger and Smith's great disciple, Gary Becker, and perhaps my neighbor and one-time colleague, Senator Obama.
What can, what should be done about this American misery?
--Richard Stern
14 comments
Hey, I thought that's what we had academics for. Just kidding. The biggest problem presented with us for the forseeable future is rising prices on everything -- gas and heating, food, etc. At the same time, we're not seeing wages rise for most people. Classic stagflation. There's very little we can do to change the way people earn money pre-tax, save a fundamental overhaul of the economy into a social market system. So at the very least we ought to combat the -flation part of the equation. Weaning ourselves off of fossil fuels is a good start. Ending (or at least scaling back) subsidies to corn farmers will actually help food prices restore to a good level globally by not making all foreign competition go out of business and therefore shorting supplies. Having government pay for health insurance would ease the burden on many families. And lastly, we gotta balance the federal budget. The federal deficit gets passed onto state and local governments, who are forced to either hike property taxes or cut back on critical services. Just my two pennies.
- rozenson
June 11, 2008 at 1:19pm
Perhaps one of the reasons is he was a chief influence of Marx...
- cthulhu2008
June 11, 2008 at 3:53pm
Rozen,
Agree with you about most of those points, but am little confused about the corn subsidies one: how will ending such subsidies on one crop contribute to widescale global supply chain improvements? I'm no economist; just curious.
- dylanposer
June 11, 2008 at 7:07pm
Ethanol is a racket but the evidence suggets that is a distinctly minor cause of the rise in food prices. Superb post, Mr. Stern. Economic conservatives long ago adopted Adam Smith as their patron saint but they leave out the juicy parts about price-fixing, etc. that characterize Smith's writings as much as does his limning the divison of labor and his championing of markets.
- liberal reformer
June 11, 2008 at 9:35pm
Excellent post Mr. Stern.
The problem with the ideological "interpretations" of A. Smith we see today is that they tend to take his words out of context and fall in the most vile forms of anachronism.
So, even if one is not a Smithian -- and if that sort of identification makes any sense -- Smith surely did not deserve the readings given to him in these last decades...
- luispc
June 12, 2008 at 3:30am
Actually, Tennessee a year or two ago snagged Nissan USA's headquarters from California, which IIRC will add s.t. like $600 per capita to the incomes of _every_ Tennesean, ie, more like $1400 per household, per annum. Reportedly, 60&% of the California workforce declined to go along with the move, so there'll be potentially thousands of new jobs for Tennesseans in the bargain.
As anyone who's lived or worked in the advanced Southern economy knows, TX TN GA NC VA are facing problems of affluence, not poverty. A not insignificant amount of the poverty would go away overnight if this country would stop flooding the low-end labor market with imported semi-literates and free up funds for better services and schools in the low-end neighborhoods.
- teplukhin2you
June 12, 2008 at 3:38am
"What can, what should be done about this American misery?" Quite obviously, the first is to elect a government that works and works for the people. Ethanol is a racket and is benefiting no one in the long term. There are fundamental changes we have to undertake to just achieve fairness, and I'm not suggesting socialism or anything like it. Every person must be able to make a living wage in order to feed and shelter themselves, and that is not going to happen without intervention. Anyone thinking that market forces will get us there on their own can just look at where we are because of them. I'll bet if someone did the math, they'd find that we're almost back to the depression era as far as an average citizen's purchasing ability vs. cost of living. Not a nice thought.
- WaltB
June 12, 2008 at 8:16am
Sure, intervention's the key. If you want to raise low-end wages, then intervene to create some tightness in the low-end labor market. Stop flooding it with tens of millions of semi-literates from abroad.
- teplukhin2you
June 12, 2008 at 11:55am
Completely off-topic:
Tybee Island. Nice choice for your summer residence, Mr. Stern. But you probably aren't that far from scenes similar to the one at Dover, TN.
- cspencef
June 12, 2008 at 12:07pm
A half-way decent (inclusive and effective) labor movement might help.
- ironyroad
June 13, 2008 at 10:25am
dylanposer: It's not going to solve Zimbabwe's inflation by any means. But any little bit helps. It's an easy fix, too, if South Dakota doesn't have as many Senators as California and New York. Food prices all around the world are skyrocketing, and we're contributing majorly.
- rozenson
June 13, 2008 at 10:11pm
teplukhin2you:
Semi-literates "from abroad" aren't the problem. In Tennessee, and here in New Mexico, and I'd guess in the US as a whole, we've got more than enough native-born illiterates to go around.
- dcoleski
June 14, 2008 at 1:19pm
dcoleski - tee hee. So riddle me this: what does it do to wage rates for said population when you increase their ranks by 2x or 3x?
Could we please admit the idiocy of maintaining this mantra about a dire labor shortage ("We need their labor!") alongside massive and chronic wage stagnation?
What market is it on this planet that does not see a huge _increase_ in the market-clearing price for a fungible good when that good is scarce?
Modest proposal: let's fix the problems of our many millions-strong existing underclass before we set about importing a second underclass.
- teplukhin2you
June 17, 2008 at 2:56am
If bad debt was the biggest factor in getting us "into credit crunch", then ban the filing of abbreviated account would definitely help us out, if not be a full fledged solution (a 100% affirmation to Richard Murphy's views).
It is easy for most to say "more intelligent fiscal management, faster regulation, rules to make banks put money aside in case loans are not repaid and lowering taxes" are key areas to focus on to revive the economy and to take that 5% unemployment rate to 3%, but I think challenge lies in the detail and exact execution.
What does "better fiscal management" mean anyway.. ?
- openuniversity
July 21, 2009 at 3:46pm