"A PATH FOR AMERICA"

...What is needed is a design for planetary plenty that factors in population, production potential, income distribution, and limited resources...

...He correctly debunks the now fashionable notion that our economic problems stem from too much consumption and too little investment...

...The "supplysiders" seek higher levels of capital formation...

...However, the Swedish socialists ran into real trouble with this approach in the 1970s, which was one reason they were retired from office...

...On that we are in accord and one only hopes that this news will eventually reach the Democratic National Committee and convince it that the current strategy of counting on Ronald Reagan to help elect a Democratic president without a platform or plan is not quite adequate to the age...

...As a former director of Bendix told the Wall Street Journal, 31 "who the hell is running the show—the business of making brakes and aerospace equipment—while all this is going on...

...The goal would be to ease the social transition to a new industrial base, but do so democratically, rather than succumb either to political demands for blocking economic change or to corporatist planning for accomplishing change...

...I think the correct answer is to move to a system of wages where a part of the wage is a bonus that depends on some measure of productivity such as value added per hour of work...

...The nature of the political choice surely will dictate economic outcomes...

...Financial transactions where old assets are bought and sold also in no way impact new real investment in plant and equipment...

...The money available to be borrowed by real investors has neither risen nor fallen...

...That gets to my mathematical "error...

...The end result is to redistribute unemployment and, overall, to lower wages—at public expense...

...It still had the advantage of a huge technological gap that let it get by with actions (less attention to quality control) that are simply no longer viable...

...The fact that capitalism is in a new "stage" does not mean that this structural transition determines everything...

...If you aren't willing to admit that fact and design a progressive way to raise America's savings rate, you simply aren't facing the facts of life and Reagan's regressive techniques for raising the savings rate will be implemented by default...

...In such a case, the government might be just another shareholder in possession of 49 percent of the stock...

...The world economy has become a zero-sum game in which one nation can gain only if another loses...

...This seemingly constructive suggestion can too easily become the basis for "enterprise zones," such as those proposed by Maggie Thatcher and, in the United States, by Congressmen Kemp and Garcia...

...manages to insulate the planning process from popular demands for preserving the status quo...

...We can no longer take that easy way out because there are too many Marxist nations—socialist, communist, or semi-demi versions of the two---that are in deep trouble because of the present anarchy in world trade, investment, and development...

...Steel take $6 billion from the U.S...

...The strategy of a deliberate depression is less a "stage" of capitalism than a political moment when a capitalist-minded conservatism decided to reverse the trend toward creeping socialism by cashing in on the failures of "the left" during the long liberal era from 1933 to 1969...

...Therefore Reich is quite right to say that, as decision-making becomes more democratic, provisions must be made to allow those affected by decisions to make hard choices without committing suicide...

...I think the "enterprise zone" concept is (a) reactionary and (b) ineffective...

...The savings rate was 11 percent in the next worst industrial country (Canada...

...They were indeed "sticky" during the 1974-75 recession—thank God...

...In the last generation, "planning" became 28 a dirty word in the U.S., even as West Germany and Japan turned to planning in the postwar years as the sine qua non of their resurgence...

...Second, and conversely, when a corporation runs out of a community simply to maximize the bottom line I am for stripping it of all tax breaks, including the right to count the cost of this antisocial move as a legitimate business expense...

...That would lower the unemployment rate and the workers' standard of living at the same time...

...That is the central case against speculation...

...It is fine to blast 27 capitalistic fixed-price markets, but you also have to deal with the fixed-price markets that benefit those who are supposedly within the left-wing orbit...

...Since then, every president and every Fed governor has pursued this policy—to control inflation by putting a tourniquet on the economy...

...But it is important to understand that both visions derive from a similar philosophy...

...capital markets and give $6 billion to the old shareholders of Marathon Oil...

...This internationalization of economies changes many rules of the economic game: the federal government, for instance, might, in Keynesian fashion, pump more money into the system to stimulate buying only to discover that Americans are using this extra buying power to import products from overseas...

...I should acknowledge a debt: many of the statistics on the welfare state in my analysis were taken from the fascinating book, Minding America's Business, by Reich and Ira Magaziner...

...Both visions are corporatist, but the corporatism has been obscured from view because the political choices underlying the visions have not been made clear...

...democratic planning is open and transparent, undertaken by people directly representative of the citizens...

...In the 1970s all governments, Democratic or Republican, fought inflation by deliberately engineering recessions to raise unemployment and idle capacity...

...Social Security assumes growth and a larger GNP to support an increasing number of retirees at a higher and higher standard of living...

...The rationale, as in the case of Eisenhower's building a highway system, will, as always, be national security...

...While I would agree that our present mess is the work of the capitalist mind, once it is allowed to go its greedy way, I do not believe our condition is inherent in capitalism per se at this stage...

...One of the possibilities this opens up (and this relates to Lester Thurow's comment on wages) is that workers in control, not simply of the way in which transitions are made but also of the benefits of the transition, will be more likely to go along with needed changes...

...But as the experience of the current French government should warn us, to be in favor of planning even when you own 35 percent of industry and all of the financial community does not necessarily lead to success...

...America needs its managers on the factory floor and not in the counting houses arranging financial deals...

...The rest of the industrial world now has a per capita income as large or larger than ours...

...we were still in Vietnam...

...I AM GRATEFUL for the comments—and more convinced than ever that the democratization of investment through the effective participation of workers and citizens in choices that have up until now been made in boardrooms is a key demand...

...It is not only good social ethics...

...But, as Fortune pointed out in October, investment in high-tech industries, like electrical and electronic equipment and nonelectrical machinery, has doubled since 1975...

...If Hubert Humphrey had been elected in 1968, he would not have proposed to control inflation by creating unemployment...

...While capital can move with relative ease, the fact is that a job in danger of being lost by a worker with no ready alternative livelihood represents a far more potent political force than a future job—even one promising more pay...

...There certainly are "fixed price" markets, but unfortunately the largest is the labor market...

...The two choices are related...

...the targeters are more concerned with how capital is allocated...

...or a new tax bill to speed capital formation may make many new millionaires who choose to invest their money in Mexico or Moscow...

...Should the bargaining occur within annual nationwide negotiations...

...Indeed, in his discussion of railroads he proposes that the end product should be run by "publicly owned corporations...

...It is not, I think, a mathematical "error" to argue that these speculative corporate gains misuse and waste real resources...

...But that is no longer true...

...q Michael Harrington Replies he comments on my article all agree that we are in a time of radical change and that fundamental new departures are required...

...that decade may merely be a moment in the class struggle when the haute bourgeoisie took over key posts in the economy and decided to use those posts to beat down the proletariat and the petite bourgeoisie ad majorem gloriam et pecuniam of the economic elite...

...Second, corporate subsidies may become the wave of the future, the darling of capitalists who, while claiming the returns derived from the "risk" of their capital, refuse to take any "risks" and prefer, through a variety of subtle and not so subtle devices, to pass the "risk" on to the government— local or federal...

...First, as designed, they simply are unviable in a no-growth world...

...they are now our technological equals...

...The governor of the Federal Reserve Board, Dr...

...Yet to overemphasize my "buts" would be quibbling...

...Accordingly, economic adjustments are occurring more efficiently in these systems...

...The neoliberal targeters want to vest authority in a reconstituted Reconstruction Finance Corporation or within tripartite industrial boards representing Big Labor, Big Business, and Big Government...

...Second, in discussing the Third World, "modernization" and "development" are customarily equated with "industrialization...

...If growth cannot be quickly re-started, the social welfare programs are either going to die or be severely pruned...

...If Reaganomics fails and we remain mired in our present stagnation, planning and industrial policies will undoubtedly be the issue of the 1980s...

...SOCIAL WELFARE PROGRAMS are under attack for two reasons...

...I think workers will rightly resist sacrifices required to provide investment funds to the current managers of American capitalism in a process that can only benefit those managers...

...By requiring corporations to put aside funds in good times in anticipation of recessions and/or structural shifts in industry, displaced workers in Sweden were assured retraining and new jobs at least as good as the ones they lost...

...This enabled the labor movement to agree to a rather rigorous, efficiency-oriented policy that shut down unproductive plants...

...In analyzing the "system" domestically, they understand the nature of combines, conglomerates, and cartels...

...If they save 22 percent while we are saving 6 percent we will simply be economically beaten at home and abroad...

...SHORT OF DECIDING that we do not want economic growth (surely a plausible political position, but one that received far more respect and attention a decade ago when we were enjoying the fruits of growth than now, when we are experiencing withdrawal pangs), the answer, it seems to me, is for America to develop an assortment of mechanisms for systematically compensating those on whom the burdens of economic change initially fall, and thereby alleviating the pain of adjustment...

...It is possible, even necessary, to expand this list of items to be covered by a national economic plan: agriculture, housing, food, water, soil, physical infrastructure, coal ports, basic research, education...

...But I think that the positive—and negative—roles that can be played by control over the money supply deserve more attention...

...price and wage controls would have been adequate if inflation warmed up...

...it is the pattern of investment that is awry, not the level...

...By contrast, the only systematic means through which economic gainers now compensate economic losers in America derives from the law of torts and of eminent domain, both administered by the courts...

...they work as hard as we do...

...I quite agree with Gus Tyler that a Humphrey administration in 1969 would have been better in every way, including economic policy, than a Nixon administration...

...Yet many of the "left" who identify factories with progress are sharply critical of those multinational corporations that use the Third World as industrial sweat shops...

...They will cut off their own parents because they won't have any choice...

...In approaching the economic question internationally, however, most of those in this country who stand left of center tend to fall into two selfcontradictory positions: First, because they are "internationalists" they are inclined to be "free-traders," although they are constantly reminding themselves and informing their audiences that the free market under modern capitalism is an illusion...

...It was the first time in the nation's history that a president had ever moved consciously and publicly to manufacture unemployment...

...Robert Reich raises some difficult and important questions...

...On proper reflection, I probably would modify that to say, Amen But...

...What is the role of workplace democracy in such bargaining...

...But as I suggested in my opening, to lengthen the list is secondary to the primary concept of planning per se...

...How can we ensure adequate representation of all affected interests...

...However, there is currently a decline in real wages and a ferocious management offensive to drive them down even further...

...However I very much want to respond to a couple of Reich's particulars...

...Reagan happens to have focused upon it as the only one, but the left cannot allow Reagan to co-opt the issue and dominate how it is resolved...

...This is true for the simple reason that economic change is often painful and disruptive—particularly for the least mobile factors of production, like low-skilled labor...

...I am certain that Harrington is aware of the danger here...

...That explanation has to be given or the cures just don't seem persuasive...

...It is hardly surprising, therefore, that the fate of capitalist democracies has been to grow more protectionist over time, unless or until a corporate elite Michael Harrington's article, "A Path for America," appeared in our Fall 1982 issue...

...It is also available as an FSISI Dissent pamphlet...

...I suggest two caveats: First, it is risky, even dangerous, to subsidize a corporation just because it "moves into a community in distress and starts hiring...

...What about the enormous diversion of talent and attention from the real to the fanciful...

...I think not...

...The issue has to be recognized and solved by the left...

...Subsidies to employers to spur employment in areas of excessive unemployment have to be handled with care, selectivity, and as part of a total national scheme...

...The political choice concerns how we execute the first choice: either throug corporatist planning or democratic planning...

...Indeed, if the economy had not been drained of vital blood in the 1970s by monetary policy and had continued to grow as in the '60s, there would have been enough money coming into Washington to fund all those social programs contained in the budget of the Black Congressional Caucus, without touching tax expenditures (although these loopholes for the elite should be closed), and to put the Social Security system solidly in the black...

...Since value added is basically sales revenue minus materials costs, an increase in oil prices would automatically reduce value added per hour of work and reduce wages by the necessary amount...

...Harrington jumps to the cures without giving a persuasive explanation of what went wrong between 1965 and 1982...

...My article was as broadly focused as it was because in Ronald Reagan's America the case for democratic planning has to be made before we can detail exactly how it will be done...

...q Lester C. Thurow INhile there is much to agree with in Harrington's article, a major portion of it is unfortunately based on (1) a failure to understand that the world has changed and (2) a simple mathematical mistake...

...Mike's thesis that our present problems flow from the "late" stage of capitalism in which we find ourselves is not likely to go unchallenged...

...A liberal president, naming a Fed governor who shared his point of view, could easily have contained inflation...

...The Japanese are as 26 smart as we are...

...If Harrington wishes to apply his railroad formula to all the sections of the American economy that are likely to lean heavily, even primarily, on public financing, then he might as well go the whole way and propose full socialism—perhaps exempting those sectors that are still small and competitive and labor-intensive...

...The inflation rate was only 4.5 percent...

...Those who are threatened by economic change almost always outnumber those for whom change brings direct and palpable benefits...

...But if there were structural changes in this country—perhaps in the Swedish mode—and if workers participated in the decisions and the benefits, that would help the entire society...

...It is becoming clear that the elaborate governmental system we have inherited is not up to the task of coping democratically with rapid industrial change on a worldwide scale...

...Germans saved 14 perNent while the Japa nese were saving 22 percent...

...The question is whether he also proposes this for steel, chips, computers, coal liquefaction and gasification, the redesign of irrigation, solar and wind and tidal and geothermal and synfuel and peat and biomass and photo-voltaic and other forms of energy—all of which require massive capital investments that the private sector refuses to undertake...

...And I certainly do not want the public to provide "risk" capital to corporations making investments according to their usual criteria...

...Arthur Burns, proceeded to enforce the proposal by raising interest rates...

...It does mean that an increasingly centralized, monopolistic, multinational capitalism in the throes of a technological revolution and a restructuring of the world division of labor is totally different from the capitalism of Franklin Roosevelt's time, or of Johnson's and Humphrey's era...

...The economic choice is between preserving an industrial base that is growing increasingly uncompetitive in the global economy, or pushing that industrial base into higher-valued and more competitive productivity...

...Steel spends $6 billion to buy Marathon Oil it is neither subtracting from nor adding to the resources available to the American economy...

...While the matter of savings is not the only source of America's economic problems, it is unfortunately one of them...

...In carrying through a "plan for rebuilding America," Harrington proposes that "corporations should receive subsidies...

...None of this can even begin to happen through global laissez faire...

...The standard left-wing answer is wage and price controls, but these are (1) opposed by the labor movement and (2) have proven ineffective whenever they have been used in democratic countries outside of wartime...

...But the question remains: how do we render the planning process more democratic without inviting just the sort of preservatives—tariffs, quotas, orderly marketing agreements, bailouts and tax breaks for declining industries, "buy America" provisions, domestic content requirements, restrictive licensing —which already are distorting the pattern of investment in America and thereby retarding the nation's economic development...

...but when viewing the same system internationally, they suddenly find themselves echoing the cliches of Adam Smith or David Ricardo, whose economic theories liberals and certainly radicals rejected many decades ago...

...The key posts were the presidency of the United States and the governorship of the Federal Reserve Board...

...Exploitative entrepreneurs rush into such distressed areas, employ distressed people at distressing wages, pick up "generous public subsidies," and then proceed to compete against producers who pay higher wages and get no subsidies...

...Third, what about wages...

...The consequences have been gangrenous...

...How is this to be arranged in a socialist world...

...I disagree with some of its proposals but find it most valuable...

...Steel now has a $1 billion annual interest charge on a total debt of $7.9 billion...

...If he wishes to find some middle way, he might consider applying the simple capitalist rule that the biggest investor ought to have the biggest voice in the ownership and control of the "company...

...If growth does not occur, workers—regardless of their political persuasions—simply won't be able to afford to pay the taxes that the program will require...

...IN HARRINGTON'S CALL for a "democratically determined economic plan," he sketches crucial areas of action...

...What the '70s should teach us is that you can't entrust capitalism to the capitalists at any stage...

...Third, I very much agree with Gus that Free Trade arguments are both irrelevant and reactionary in a world economy manipulated by multinational oligopolies, usually with government backing...

...Once we seriously address ourselves to the process, we will discover many new needs (immediate and future) and also discover the inevitable interrelatedness of the separate sectors...

...It still had a per capita income that was much larger than that in the rest of the industrial world...

...This isn't true, but the left has failed in articulating its explanation of why the economy has failed...

...The neoconservative supply-siders seek to place authority for economic adaptation in the hands of the Federal Reserve and America's largest corporations...

...But they were not, in my opinion, inherent in any stage of capitalism...

...Because it lavished $5.9 billion in debt on the Marathon Oil take-over, U.S...

...But—and I borrow the notion from the Swedish socialists in the '60s and early '70s—when a corporation actually makes an innovative and risky investment that will generate jobs in an area of great need (high unemployment, high poverty rates, and so on), I am for a handsome tax credit...

...When the purchase is made, the shareholders of U.S...

...it is sound economics...

...I am not simply talking about the huge fees paid to bankers and lawyers (the London Economist estimates that such people received about $30 million for several weeks' work during the Pac Man caper...

...Idle people and equipment were supposed to stop prices from rising...

...To see the financial gyrations on Wall Street as central to America's current economic problems is to simply see a mirage that is irrelevant to reality...

...Martin Marietta had to pay very real money— which could well fetter, or even cripple, the operations of a previously efficient corporation—in order to resist the Bendix bid...

...What is the left's realistic solution for fighting inflation...

...It is not even simply a matter of the impact of tens of billions in borrowed take-over dollars on the interest rate, that is, the way in which speculative games make real investments more costly and perhaps less likely...

...But here again I do not know Harrington's solution since he isn't willing to confront the problem...

...He urges the "creation of entire new industries," in particular a "national commitment to renewable energy sources" and the "construction of a new rail system...

...On corporate subsidies, perhaps I did not speak 30 clearly enough...

...the amount of restructuring was greater than in the past...

...Second, Lester assumes that historical rates of saving and investment are required in the future...

...The central failure of American liberalism was its neglect of national planning in the complex age of today...

...As president of the United States, Richard Nixon, in his 1970 Report to Congress, called for an "actual growth" that would be below the "potential growth" to offset the excessive growth of the late 1960s...

...The problem is not a lack of planning, but stupid planning...

...Finally, Harrington, quite properly, stresses the international dimension of modern economies...

...The whole question of international trade and investment has, like monetary policy, been neglected by "the left" on the general assumption that "socialism" or something like it is the answer...

...Corporatist planning is secretive, undertaken by an elite that is accountable to the public only indirectly at best...

...q Gus Tyler " Path for America" comes in two parts: the first is analytic, the second prescriptive...

...There is no question that a worker-controlledor even influenced—approach toward investment will be "conservative" about writing off jobs...

...I know that Marxists are somehow uncomfort29 able about discussing monetary policy...

...If we wish to preserve both democracy and prosperity, we must find an alternative to both protectionism and corporatism...

...A 6 percent savings rate simply isn't viable any more...

...In America's golden age, the United States did not have to operate in a world of economic and technological equals...

...Second, the chief sources of non-residential fixed business investment have been retained profits, pension funds, and massive institutional investors such as the insurance companies...

...In the last three decades of "development," rapid industrialization has done little or nothing to elevate the living conditions of the great mass of people in the poor countries but has done much damage to the necessary "agriculturization" of these nations, whose rural populations could have gained greater economic independence if they had—as some now try to do—concentrated on the development of their natural resources and talents...

...One last point—in some ways it applies to Tyler and Thurow as well as Reich...

...Is it true that the "Pac Man Takeover" initiated by Bendix has nothing to do with real resources since the money changing hands is still available for real investment...

...And yet, we would still be living in the same "stage" of capitalism...

...Harrington brings us part way to an answer, but not quite far enough...

...To conclude simply that we need democratic planning, as does Harrington, therefore begs the critical questions—all of which concern how we structure this bargaining process to ensure economic growth...

...By my rough calculations, close to 30 percent of the American economy is involved in international trade and investment...

...I do hope that these comments will help carry forward the discussion that Mike has so ably initiated in his provocative piece...

...What did go wrong...

...Harrington's programs to achieve full employment, allocate credit toward productive uses, eliminate tax loop25 holes, and provide notice of plant closings are all premised on his more fundamental prescription that we democratize the planning process...

...This bargaining would be open and explicit...

...Not an easy problem to solve but one that must be solved if growth is to be restored...

...Our 6 percent savings rate used to be multiplied by a much larger per capita income, so that a low savings rate did not lead to low investment relative to the rest of the world...

...Is it possible, as the Systems Dynamic Group at MIT has suggested, that there is now overinvestment in the traditional industries...

...Corporatist planning predominates in modern-day Japan and West Germany, and within the world's largest multinational corporations...

...The recession of 1974-75 was much deeper and more protracted than earlier downturns in Sweden...

...Although monetarism as a means of fine-tuning the money supply to cope with stagflation is pure fantasy, the use of monetary instruments can—and has—in a gross way been the root cause of the sorrowful '70s...

...If economies are to operate without inflation and a shock such as OPEC I or OPEC II comes along, wages can only fall...

...Social Security will be broke by next summer not because Social Security was poorly planned, but because the economy is operating poorly and is poorly planned...

...The mathematical error comes from not making a sharp distinction between real and financial resources and from failing to follow a transaction through to the end...

...Second, Reagan has been successful in persuading much of the public that the social welfare programs and too much big government are the cause of the economy's current problems...

...and the cost of the old approach became extremely high...

...At present, the most articulate proposals to restore the American economy call for either tax reductions or targeted industrial policies...

...The problem with speculation is not that it uses up financial or real resources (it doesn't), but that it draws off scarce human resources (managerial talent) that could be better used building new factories or that it adds to monopoly power...

...But democratic nations face a dilemma, because—all too often—democratic planning (or what passes for democratic planning) results in economic stagnation...

...More of the American GNP must be given to OPEC and there is simply less for Americans to divide among themselves...

...The Swedish socialist "active labor-market policy" has tried to do more or less what Reich suggests...

...Even the current French Socialist government has just announced that it will follow this strategy in the coming year...

...I was, I think, insufficiently radical in not stressing the need for a planned reduction of the working week, year, and life, in the face of a technological revolution that could well shatter the traditional link between work and income during the next two or three decades...

...As an activist who invariably asks, What's to Be Done, I listen most intensely to the second part and feel impelled to say, Amen...

...The sad '70s may not at all be a "stage" in the development of capitalism...

...Thus the challenge: how to combine democratic planning with a dynamic economy...

...Real investment is made possible by not consuming the real resources (capital, labor, and material) that are necessary to build factories and equipment...

...So, in the all, I would say: right on—or maybe left on, comrade...

...If U.S...

...The old owners of Marathon Oil now have $6 billion that they return to the capital markets...

...Lester sees a low family saving rate as the case of a general shortage of capital in American society...

...Michael Harrington is characteristically insightful in his essay, "A Path for America...

...Perhaps they could be made to work, but someone has to spell out in detail exactly how it is to be done and no one has...

...To what extent should it occur within states, regions, and communities...

...Will a high-tech economy have the same investment contours as a mass-production economy...

...How can we ensure that those who administer these bargains are also accountable...

...That is one reason why Olof Palme's new government will seek a more radical response to the problem: wage-earner funds that will gradually make democratic collectivities of workers and community representatives into the dominant force on corporate boards of directors...

...The substance of the compensation might take the form of aid in job retraining, assistance in relocating, funds for new regional industries to absorb the newly unemployed...

...In effect, through these compensatory mechanisms, those who stand to gain from industrial development would strike a bargain with those who bear the direct cost—a bargain through which some of the benefits of the gain would be redistributed to the losers...

...Last year the average American family saved 6 percent of its income...

...One "solution" to the current crisis would be to turn organized workers making $10 dollars an hour into unorganized workers receiving the minimum wage...

...But it is not possible to devise a national economic plan without knowing how to manipulate monetary levers...

...Harrington tells us that we do not need to take actions to raise the American savings rate because plant and equipment investment is slightly higher than it was in America's golden age (the 1960s) and a lot of money is being used for speculation to rearrange assets rather than to increase assets...

...This particularly has been the case in recent years, during which oil shocks and Third World industrialization have rocked the foundations of advanced economies...

...Simply, if unemployment were at the same 3 percent rate as it was when Nixon came in, we would—in the absence of a Vietnam— be running a surplus...

...Harrington's refusal to even admit that the issue exists does not help...

...Lester Thurow's comments are, as always, thought-provoking even if one disagrees with some of them...

...It could afford to do things the rest of the world could not afford to do...

...And because monetary policy—like high interest rates artificially set by the Fed—can and did depress the total economy, monetary policy profoundly affected fiscal policy...

...And once the plant is established, the private sector will expect, as in the case of nuclear plants, to continue as the sole owner and operator of the publicly sired enterprise...

...But family saving in this country has normally been in the form of investments in houses, and it can be argued that overly generous federal subsidies, particularly to the upper middle class and the rich, diverted resources from more rational uses...

...Harrington does touch on this lightly with his proposal to reform the Federal Reserve Board...

...In a national economic "plan," I do think it is necessary to include monetary policy...