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Jeff Madrick, author of the Age of Greed, says with wages flat austerity measures and the domination of finance we face a very dangerous situation

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. The stock market crashes and the media tells us we’re on the precipice of a global meltdown, economic apocalypse. Next day, this market goes up. Everything’s okay. Sigh of relief. Next day, it crashes again. The media seems to judge the global economy by how the stock market’s doing, but they’re not even really listening to why there’s such volatility, which we’re told, especially if you read the financial press, is fears of a global financial recession, a global economic recession. Instead what we’re seeing is stories about the Republican leadership and straw polls and Michele Bachmann. But how dangerous a moment are we really in? Now joining us to discuss this is Jeff Madrick. Jeff is the author of the book The Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present. He’s also a senior fellow at the Roosevelt Institute and the Schwartz Center for Economic Policy and Analysis. Thanks for joining us again, Jeff.


JAY: So how dangerous is this moment?

MADRICK: Well, I think it is dangerous. It’s dangerous for political reasons. We’ve boxed ourselves into a set of economic policies–austerity economics, call it–which will make it very hard for economies both in North America and Europe to grow, and even threatens growth in nations like China and India. There is the potential for tragedy here. People talk about a lost decade, but there’s a potential for another recession. We may escape that. But escaping a recession technically is not nearly good enough, not with unemployment at 9 percent, with real unemployment (that is, when you include all the people who’d really want a full-time job) up around 15 or 16 percent, and sometimes people leave this out of the equation, with wages flat, not rising, or even falling for some, and a very high proportion of the American workforce losing their jobs permanently, and those who get a new job usually get a new job at a lower wage or salary.

JAY: Nouriel Roubini, the economist and the author and, you know, one of the guys that is credited with predicting the collapse in 2008, he had wrote an article recently where he said Karl Marx turns out to be right. He said, we all thought that markets would work, and it looks now like Marx might be right: capitalism destroys itself. He says, you can’t keep thinking you can have growth if you have continuously stagnant and low wages. What do you make of that?

MADRICK: Well, that’s a long–that’s not only Karl Marx, but John Maynard Keynes, for that matter. I do think that Roubini is onto something. We have allowed–and that’s what my book Age of Greed is about. We’ve allowed finance to dominate the American economy–and the world economy as a consequence. Europe has gone, to some degree, the same route. When finance dominates an economy, it begins, I think it’s become quite clear, to play games among themselves to make money. It becomes paper shuffling. And I don’t say that lightly. I know it’s often used and become a cliché, but it does become paper shuffling. We don’t channel investment in the right place. And one of the consequences, one of the serious consequences of what I call this age of greed has been to take it out on American workers. Public policy has been directed to keeping inflation down, with avid support from mainstream economists, both Republicans and Democrats, both in the Clinton administration and the George W. Bush administration, and going back to the Reagan administration, and to some degree even the Carter administration. To keep inflation down, a popular assumption has been you have to keep wage growth low and, I think, for decades now, unemployment too high. That–so the character of this age of greed, beginning around 1970, has very much taken on the character of what Marx predicted, which is that wages would not go up, that profits would keep going up, and that we’d enter an era of finance capitalism, which indeed would be the last stage. I don’t think (and I don’t think Roubini thinks) it has to be the last stage. But the way Europe is acting now, and the way the Republicans and Democrats–and I include President Obama in this view–the way they’re acting about cutting government spending in the face of such poor economic growth and poor employment prospects is–to say it’s discouraging is an understatement.

JAY: Then what do you make of President Obama’s role in this? It seems like he’s conceded the rhetorical war on austerity. You know, he talks about not minding his medic–health care plan be called Obamacare, because he wants to say Obama cares. But when it comes to the real austerity policy, that’s where he seems to have agreed. And when it comes to any kind of real direct jobs program, he’s totally wedded to a private sector solution, and then now not–you know, hardly even that.

MADRICK: I think you’re right, and I think this is driven by politics. I think his economic–his political team within the White House has made a decision that he should appear to be the centrist, the so-called sensible guy. He agreed that government spending and deficits were the problem back in 2010 when he appointed the Simpson-Bowles commission–a far-right Republican and a right-of-center Democrat–to balance the budget. And he’s continued to agree that that is the problem. They’ve read the election results of 2010 as indicating Americans were interested in cutting government spending before other economic concerns. My reaction to that is: why wouldn’t they be? The major political voices in Washington only talked about government spending. If you don’t get the president to talk the truth–and, again, I hate to use–term–use those kinds of terms, because it sounds like political swaggering and political demagogy, but to talk the truth about how we can reestablish a serious job machine in America. If the president’s not doing that, who’s going to do it in Washington? Certainly only the margins of the media will do it.

JAY: So now we’re in where we are. And do you think we really are on the edge, then, of the beginning of a decade of depression?

MADRICK: We are on the edge, at least, of the beginning of a decade of slow economic growth, high levels of unemployment. A depression–a depression was very severe, but something that we might call in the future a second serious depression. I don’t think we’re going to get serious drops in industrial production and huge surges in unemployment in the way we did in the 1930s. And we’re looking at a period in which there is enough fear, both in the US and in Europe, to start creating political instability. And this is something we really don’t think enough about in the US. We think we’ve had such a long period of relative political stability, the Vietnam war aside, and we forget the Detroit riots and so on, which were only 40-plus years ago. But we’ve had such a long period, we don’t think we could–that could occur again. What makes me most sad about President Obama is I don’t think he still to this day fully understands how nervous Americans are and indeed how much pain there is out there.

JAY: Well, he seems to be totally focused on reelection, and it seems to–it’s easier to go with the mainstream center, center-right flow than to go against it, even though his own election proves that people wanted at least what he promised–certainly, I don’t think, what he delivered.

MADRICK: Well, I think he promised change, and he really didn’t give it to us. We had a couple of moments there, the Obama stimulus, some attempt at health care reform, which I found relatively brave, but he dropped out of that political discourse way too early yet again. So I’m pretty concerned. I think it’s what–I wouldn’t call it the easier way for reelection. I think he’s playing a very safe, no-risk away, and it could probably backfire. It may well backfire.

JAY: Well, what do you think of people that are calling for some serious primary challenge to President Obama?

MADRICK: Yes, I did it myself on a TV program recently. I think we need to reestablish a left voice with some power, not one that can be by and large neglected, ignored, and even made fun of by this White House, which is especially disturbing.

JAY: Who do you think that could be?

MADRICK: Gee, I’m not in that game. I’m not very good in that game. But I don’t have a Rolodex of political candidates. I every once in a while think Andrew … would be a pretty good candidate, except he likes to cut taxes too. So I don’t know exactly who we’re talking about. We need somebody fairly credible, but somebody who’s willing to talk about a serious job program, serious public investment, and ultimately, in the end, tax increases after we get the economy back on track. You know, we don’t have a budget problem for ten years. We have seriously stabilized that situation. We have a health care problem beginning ten years from now which will drive Medicare and Medicaid costs up. And it’s very important for Americans to understand that.

JAY: Thanks for joining us, Jeff.

MADRICK: Thank you, Paul.

JAY: Thank you for joining us on The Real News Network.

End of Transcript

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Jeff Madrick is a regular contributor to The New York Review of Books, and a former economics columnist for The New York Times. He is editor of Challenge Magazine, visiting professor of humanities at The Cooper Union, and senior fellow at the Roosevelt Institute and the Schwartz Center for Economic Policy Analysis, The New School. His last book, The Case for Big Government (Princeton), was named one of two 2009 PEN Galbraith Non-Fiction Award Finalists. His new book is titled, Age of Greed, The Triumph of Finance and the Decline of America, 1970-Present and is published by Alfred A. Knopf.