AFTER REAGANOMICS, WHAT!

...From September 1973 to September 1974, a period of plummeting sales, wholesale prices in concentrated industries rose by 27 per cent according to one study, while industries which still maintained a measure of competition held their price increases to 5 per cent...

...In the major concentrated industries, which are also the most thoroughly unionized, labor seeks compensation for on-the-job frustrations by pressing for higher wages and benefits...

...The financial press has given some play to Felix Roha-tyn's plan for reviving the Depression-era Reconstruction Finance Corporation, and Business Week has advanced some other ideas regarding planning...

...Another is the kind of production encouraged (if not compelled) by the market economy...

...These costs, in turn, are passed on to consumers—including the alienated workers, who find in the consumption of luxury goods a way of exercising the kind of freedom and creativity that is denied them on the job...

...The deepening economic crisis is likely to give the Left attentive new audiences— and potential constituencies—for its proposals...

...Michael Best, an economist at the University of Massachusetts-Amherst, has pointed to the distinction between "exclusive goods" (which are stressed in our system) and "inclusive goods" (which tend to be neglected...

...But entrenched corporate interests will not stand idly by and let the Left seize the initiative...

...As it turned out, the great expansion of the mid-1960s could not be sustained and the glowing promise was betrayed long before Reagan entered the White House and long before Reaganomics entered the language...

...Furthermore, some of the special events blamed for disrupting the smooth application of Keynesian remedies were, in themselves, direct consequences of Keynesian policies...

...The so-called trade-off between inflation and unemployment has exacted a stiffer and stiffer price: In each new crank of the cycle, it takes a higher level of unemployment to put a lid on inflation—and each economic recovery instantly lifts the lid...

...The planning process would involve little input from workers or communities, though it would obviously affect them drastically...

...still another would be a massive retraining program for large numbers of workers...

...No radical restructuring of our political and economic life can—or should—succeed in the United States unless it extends full protection to civil liberties and full support to the democratic process...

...Keynes and his disciples claimed to have found a way out of the capitalist dilemma: Severe economic swings—boom-and-bust—could be avoided by governmental intervention...

...But the military Keynesianism we have pursued since World War II to keep the U.S...

...From 1964 to 1968, the unemployment rate dropped from slightly more than 5 per cent to less than 4 per cent—a level that would be considered "full employment" today...

...Domestic welfare spending, for example, runs into direct conflict with capitalist interests...

...Leonard Silk, an influential economics writer for The New York Times, has devoted several recent columns to the possibility of a depression and the steps that might be taken to avoid one...

...Before we can begin to address those questions, we must try to understand the nature of the fix we're in and the way we got into it...

...None of these structural defects that have increasingly bedeviled our economy can properly be blamed on Ronald Reagan and his program...

...one-sixth of our jobs depend on it, directly or indirectly, and so do the profits of some of the largest U.S...

...The Left, in turn, may ultimately have to respond with broader programs of public control over financial and manufacturing capital and more militant strategies to buttress those programs— including plant seizures...

...Economic cycles, the familiar boom-and-bust, are part of our history...

...Exclusive goods are those that are most useful when they are reserved to a few, while inclusive goods attain their highest value when they are widely shared...

...For the most part, the big business response is the traditional conservative remedy that found favor in the Ford and Carter Administrations: The way to curb inflation is to reduce Federal deficits by cutting Federal spending...

...Such ideas, combined with efforts to democratize the labor unions themselves and foster a greater degree of worker control on the job, form the basis of a program that can be effectively promoted to growing numbers of Americans...

...and to devote more and more energy to such pursuits as redundant distribution, sales promotion, finance, tax avoidance, merger activity, speculation, and the like...

...The reliance of U.S...

...Other Left activists, focusing on alternative institutions that might be created at the state level, have suggested that investment authorities could be funded by state employees' pension funds, private-sector unions, and temporarily idle public funds...

...But there is a dilemma here: Obviously, we cannot hope to carry out a comprehensive program of democratic socialism in the short run...

...As it becomes clear that a steadily shrinking pie must be divided among members of a seriously fragmented society, a deepening political crisis will keep pace with the economic crisis...

...If the demand for products was insufficient to maintain full employment, government purchases or...

...Before the devastating Great Depression of the 1930s, economists assumed that these ups and downs of the business cycle would be self-correcting, returning the economy eventually to equilibrium and full employment...

...Corporate concentration and the upward pressure it exerts on prices is one such special event...

...Paradoxically, workers can often be enlisted to support military spending—first, because they are persuaded that it generates jobs, and second, because their identification with the nation's imperial objectives permits them to think of themselves as being "free...

...One important factor is the form of government intervention we have practiced since World War II...

...As economist Harry Magdoff observed recently in The Nation, "It is the nature of advanced capitalism, under the guidance of the profit motive, to neglect the enormous potential production of goods and services...

...Averell Harriman's influential Democratic study group...

...The Left must confront this problem head-on—not by joining in conservative demagoguery to "kick the bums off welfare," but by pushing for a full-employment economy in which all workers will have the leverage to raise their work life to more rewarding levels...

...The outcome of the struggle ahead for control of the economy will depend on the extent of worker and community initiative in forming a program and carrying it out...

...Other factors in our economic disarray are complex and difficult to quantify, but they are real nonetheless...

...Such authorities could create new industries or revitalize old ones—but they would be run by representatives of the unions and communities they served...

...As it happens, military spending is an inefficient way to stimulate the economy, generating relatively few jobs per dollar spent...

...To reduce Federal spending now, without somehow ensuring a higher level of capital investment in productive industries, is to condemn the economy to a continuing crisis of high unemployment and inflation...

...economy from plunging into depression...

...Control over investments and the workplace would remain in private hands, but government would regulate the total demand for goods and services...

...But, as many critics have noted, there is no assurance in Reaganomics that savings will, in fact, be generated, or that they will be routed into productive investment...

...No one talks that way any more—or has for quite a while...

...The automobile is our most prominent example of an exclusive good...

...What is most noteworthy about the current depression worries, though, is the acknowledgment by mainstream economists and ranking corporate executives that the U.S...

...A widening gap has opened between workers employed by the large, unionized firms and those who work for smaller, more competitive enterprises...

...Instead, the economy flourished, meeting the consumer demand that had been deferred during depression and war, exploiting new technology, and providing the military hardware for Cold War rearmament...

...does not make one inevitable (though students of American capitalism have always recognized that a "loss of confidence" can contribute heavily to an economic slide...

...The United States lost 16 per cent of its share of world markets in the 1960s, and another 23 per cent in the 1970s...

...On the other hand, mass transit—the inclusive product that would solve the auto's problems and others, too— is virtually denied public assistance...

...In political terms, the Reagan response was a success in the 1980 Presidential campaign...

...This, too, is a factor in persistent inflation...

...In the absence of meaningful alternatives from business and the mainstream political parties, the Left has an opportunity and an obligation to develop and disseminate a plausible program of democratic economic planning...

...Monetary policy is not magic...

...But the Reagan program has even more serious shortcomings...

...And unless they are accompanied by creative structural changes in the economy, they will continue to be rejected by a disillusioned electorate...

...Is there, in other words, an alternative to Reaganomics—and if there is, who has it and how will it work...

...They drive up government spending and contribute to high tax and inflation rates, and as Reagan has repeatedly charged, they are vestiges of the past—not alternatives for the future...

...another would be a system of public subsidies to shore up the crumbling industrial base in Northeastern and Middle Western cities...

...industry on cost-plus Pentagon contracts has promoted technological sluggishness, allowing the competitive edge to slip to other nations...

...Saving a few selected industries would entail substantial sacrifices by all workers—those in the affected industries and those outside...

...But the familiar liberal demand for that kind of funding transfer is both politically and economically unrealistic so long as the Keynesian commitment to the profit system remains intact...

...capitalism will have to embrace some of the more imaginative forms of economic intervention that were put into effect long ago in other capitalist democracies...

...economy in equilibrium is only one of the structural causes of our current crisis...

...In that sense, jingoism helps ease the pain of alienation and powerlessness on the job and in the community...

...The recession is Reagan's recession now, and if we are heading into a full-blown depression, as some respectable and conservative economists suggest we may be, it will be Reagan's depression...

...Similarly, Americans—and especially frustrated blue-collar workers—will continue to resent welfare programs that redistribute income, however modestly, to those who do not work...

...To build mass-transit systems is to jeopardize the automobile industry...

...Paradoxically, the worry about loss of economic control comes in an Administration closely aligned with business interests, and contrasts sharply with the heady optimism of the 1960s, when the prevailing view was that Government action could stabilize the economy and spur it to steady growth by "fine tuning...

...Keynes himself acknowledged in 1940 that it seemed "politically impossible for a democracy to organize expenditures on the scale necessary to make the grand experiment which would prove my case—except in war conditions...

...It seems likely, therefore, that it will take a considerably more acute economic crisis to persuade business that planning must be taken seriously...

...Ultimately, a radical agenda can prevail in America—but only if it protects those freedoms that corporate capitalism is ever more ready to undermine and destroy...

...Lester Thurow, the liberal MIT economist, has recently endorsed state investment banking as a means of carrying out a national industrial policy...

...In the same period, the annual inflation rate never exceeded 5 per cent...

...Two major unions, the United Auto Workers and the International Association of Machinists, have endorsed the concept of a national development bank— but one that is held democratically accountable, not "insulated" from political pressure...

...While the Reagan Administration has lately come under fire for lax enforcement of the antitrust laws, the fact is that no Administration has been willing or able to impose serious curbs on business mergers...

...Alan Greenspan, a member and chairman of the Council of Economic Advisers in the Nixon-Ford Administrations, conceded in a recent interview that his estimate of the likelihood of a depression had increased from one chance in a hundred to one in ten...

...But is the political reality also the economic reality...

...One thing is clear: Our economic troubles are sufficiently severe to stir apprehension in some surprising quarters...

...corporations...

...Keynesian doctrine and its practitioners have always made it a point to shun any governmental interference with the structure of industry...

...Sooner or later, U.S...

...yet some of the narrow reforms that can be achieved would only prolong or intensify our travail...

...If the Democrats regain control of the Senate this fall, strengthen their majority in the House, and elect a moderate or liberal President—Walter Mondale, say, or Edward M. Kennedy—in 1984, will they be able to revive the welfare state and set the country back on the road to prosperity...

...The victor, John F. Kennedy, resorted to tax cuts and substantial increases in military spending (to close a nonexistent "missile gap"), and his experience seemed to confirm the notion that judicious government intervention could keep the economy on a course of steady growth...

...On the contrary, Reagan's "supply-side economics" must be recognized as an attempt, however inadequate, to respond to the obvious failure of the liberal Keynesian approach...

...Military spending, on the other hand, poses no such threat to business, and can always be justified in terms of patriotism and "national security...

...Plant utilization rates are already extremely low, and that gives business little incentive to pour more capital into new plants...

...We have had mounting deficits since World War II—and a steadily climbing Federal debt—because high levels of Federal spending have been the only means of keeping the U.S...

...A recession toward the end of the Eisenhower Administration played a part—perhaps a decisive part—in Richard M. Nixon's narrow defeat in the 1960 Presidential contest...

...But history is, after all, a succession of special events, and an economic system must be capable of coping with them...

...Like its Keynesian predecessor, it provides no assurance that higher levels of production, should they be stimulated, will not immediately spur rampant inflation...

...Today, even though these problems are beginning to be widely recognized, it is virtually impossible for this country to turn its back on the automobile...

...Not one that promises relief...

...Many liberals, on the other hand, are tempted to turn back to their traditional agenda as an alternative to the harsh austerity of Reaganomics...

...Such measures are not cure-alls, and they would exact a heavy price...

...With each turn of the cycle, there will be an increase in government, corporate, and personal debt...

...Savings and investment are to be encouraged by tax cuts, while tight Federal Reserve reins on the money supply are meant to curb inflation...

...by 1974, their share had risen to about two-thirds, and in most manufacturing industries four or fewer firms controlled at least half of the sales...

...Some economists blame the failure of Keynesian remedies on 'special events'— but history is, after all, a succession of special events, and an economic system must be capable of coping with them It was too good to last—and it didn't...

...As autos became mass merchandise, however, individual costs increased, and so did social costs—congestion, pollution, fuel scarcity...

...To erect public housing is to compete with private landlords...

...In that sense, Reaganomics has simply carried on—and intensified—the Keynesian trends...

...Does big business have an answer to our economic disarray...

...At a time when capitalism was in grave peril, Keynes promised to save the system by eliminating the punishing extremes of the business cycle and ensuring full employment, price stability, economic growth, and a favorable balance of trade...

...Participation in such concentrated arrangements does not necessarily guarantee profitability, but it does virtually ensure price increases...

...By the 1930s, it proved to be wholly out of step with what was happening...

...When workers see others receiving "unearned" income, they find it difficult to rationalize their own sacrifices in monotonous and demeaning jobs...

...In any event, by the end of the war, the Keynesian doctrine was firmly entrenched as the economic program of liberal Democrats, and of a growing number of "moderate" Republicans...

...Is the current shape of the economy entirely (or mostly) Reagan's fault...

...It was, after all, not the New Deal but World War II that pulled the U.S...

...Some segments of the Democratic Party have given signs that they are intrigued by corporate-oriented planning proposals...

...But economic concentration is by no means the sole—or even the most significant—cause of Keynesian failure...

...government aid to boost purchasing power would make up the difference, directly or indirectly stimulafing the economy to a full-employment level...

...capitalism in the postwar years...

...Where a business controls a large portion of the market, it can push prices up even when demand is decreasing...

...Democratic socialism-if we dare BY JOHN BUELL Whether he wants to or not—and, understandably, he doesn't want to—Ronald Reagan can no longer avoid taking responsibility for the consequences of his economic program: It's firmly fixed in the public consciousness as Reaganomics, and one-third of the way through the President's four-year term he can hardly continue to blame the unemployment rate or the budget deficit or other signs of severe economic disarray on the policies pursued by his predecessor...

...economy may be out of control—that the Government may lack the means to stave off a depression...

...In economic terms, it has already flopped, as it was bound to...

...In its early days, it provided the wealthy with comfortable and efficient transportation...

...Despite the scenarios that call for a fullblown depression soon, the greater likelihood is that present trends will continue for some time, repeating the cycle of stagnation, government stimulation, inflation, government retrenchment, unemployment, stagnation...

...The common thrust in these efforts is to "insulate" the emerging planning mechanisms from political—that is, popular democratic—pressures...

...without it, the planning that is surely coming in one form or another will carry a heavy measure of repression...

...Wage gains scored by the former tend to increase the cost of living for all workers, but the latter find it more difficult to achieve the wage gains that would let them keep pace...

...Recessions in 1953 and 1957 were neither deep nor long, and the Keynesian assumption of a controllable economy became, in many quarters, virtually an article of faith...

...Their receptivity to it will increase as the economic crisis deepens...

...The challenge to the Left, therefore, is to concentrate on the reforms that are consistent with long-term goals—specifically, those that help build broader political coalitions and give workers and communities direct experience with such decisions as investment priorities and control of work life...

...Obviously, such talk of a depression John Buell is an associate editor of The Progressive...

...Regional banks would be affiliated with the national bank, and would have democratically elected members on their governing boards...

...Finally, more and more of the work force in the monopolized segment of the economy is assigned to advertising and other essentially unproductive activities...

...Workers' wages, held down to enhance profit margins, prove insufficient to sustain consumption...

...But the most influential business lobbying groups, such as the Business Roundtable, have made it a point to stick to traditional budgetary remedies...

...One study has demonstrated that if 30 per cent of the military budget were transferred to education, health, welfare, and environmental programs, both total output and total employment would increase by 2 per cent...

...The Keynesian solution was essentially conservative...

...The rule was called Say's Law, a Nineteenth Century version of supply-side economics, and it was a poor analysis of the capitalist system even in the Victorian age...

...By the late 1960s, the hybrid beast called stagflation, a combination of economic stagnation and inflation, had been let loose on the land, and it is with us yet...

...It is a prescription for deeper and deeper recession...

...To broaden welfare programs is to diminish the supply of cheap labor...

...There is some disagreement among business leaders about whether to reduce military spending, though there is consensus that the major cuts must be in the domestic welfare area...

...Whatever its potential drawbacks and advantages, however, economic planning simply does not seem to interest most U.S...

...To keep that crucial industry functioning, taxpayers must come across with hefty subsidies—indirect, as in highway construction, or direct, as in the Chrysler bailout...

...John Maynard Keynes, in The General Theory of Employment, Interest, and Money (1936) and other works, provided a new, more sophisticated analysis that seemed to be much better attuned to Twentieth Century realities...

...In 1954, the leading industrial corporations on the Fortune 500 list controlled about half of all industrial sales...

...One example would be a central bank that could channel funds into the expansion of high-technology industry...

...Essential Reaganomics is a combination of expansive fiscal policy and stable monetary policy...

...The ability of the major industries to pay relatively high wages has introduced another dislocation into our economy...

...It can be assumed that repressive countermeasures will take both political and economic forms...

...Paul Samuelson's basic economic text, the all-time best-seller on which a couple of generations of American college students have been nurtured, spells out the rhythm: Investment, which is essential for business expansion and profit growth, also lays the groundwork for decline when consumption fails to keep pace with production...

...That is the political reality, and it is likely to have a notable impact on the outcome of the Congressional elections this fall and the Presidential race in 1984...

...Fifteen years ago, Walter Heller, an economic adviser to Presidents Kennedy and Johnson, put it this way: "The significance of the great expansion of the 1960s lies not in its striking statistics of employment, income, and growth, but in its glowing promise of things to come...

...business leaders at this time, and therefore it does not interest most mainstream politicians who take their economic cues from the business community...

...It can also be argued that the Government's preparations for war and wartime expenditures were, in themselves, applications of the Keynesian remedy...

...Workers react by resorting to absenteeism, wildcat strikes, or sabotage—all factors in the "productivity crisis" of recent years...

...Keynesian theory assumes that any kind of government purchase can help pull the economy out of a slump, but the United States has relied primarily on military spending—some $2 trillion worth since 1946...

...But for reasons that extend beyond mere inefficiency, military spending is a poor' consummation of Keynes's "grand experiment...

...economy out of the Great Depression...

...Socialists had predicted the collapse of U.S...

...In 1980, a Senate Democratic task force on the economy called for government intervention to aid business investment, and specified that such intervention should be "insulated as much as possible from political pressure"—that is, from public control...

...It can be argued—and it has been—that the Keynesian solution failed its first great test in the 1930s...

...But there is virtual unanimity on the need to reduce the Federal deficit by one means or another...

...If we define recession as a decline in total production for six months or more, the United States experienced twenty-five recessions from 1865 to 1965— one every four years, on the average...

...For the present, as Paul Sweezy, the editor of Monthly Review, has remarked, "the failure of Rohatyn to gain any noticeable support only underlies the intellectual confusion, not to say bankruptcy, which characterizes the business community...

...Some Left and labor groups have begun to advance proposals that move in these directions...

...During the period from 1967 to 1980, despite chronically sluggish demand and persistent unemployment, prices rose by 125 per cent...

...But while such conventional liberal measures as public housing, urban renewal, child nutrition, and job training may be well-intentioned, they hardly constitute an economic program...

...There is disagreement, too, about Reagan's personal income tax cuts...

...When work is organized to maximize corporate profits, blue-collar labor tends to become monotonous, demeaning, and even dangerous...

...The emphasis on democracy is essential...

...And The Wall Street Journal reports that the ubiquitous Felix Rohatyn has had discussions with Mrs...

...the only way the Federal Reserve can control inflation is by tightening the money supply and raising interest rates to a level that sends businesses—and whole industries— into decline...

...Some economists, determined to sustain their confidence in the Keynesian prescription, blamed its failure on "special events"— Soviet grain purchases, the Vietnam war...