Posted: January 22, 2009
Mount Holyoke professor of economics Fred B. Moseley is one of 20 progressive economists who have issued policy statements designed to contribute to the national debate as the Obama administration and the new Congress face the challenge of reviving the ailing U.S. economy.
The statements, titled "Principles for Economic Recovery and Financial Reconstruction from Progressive Economists" and "Progressive Program for Economic Recovery and Financial Reconstruction," are sponsored by the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst, and the New School's Schwartz Center for Economic Policy Analysis.
"I participated in the Progressive Economists group because the U.S. economy is experiencing its most serious crisis since the Great Depression, and we need to think long and hard about what caused the crisis and what the best solutions are," Moseley said. "I think fundamental changes are needed to recover from this crisis and to make sure this never happens again."
The PERI group argues that a successful economic program must reject the extreme free market and neoliberal policies that contributed to the current economic debacle. The economists support the Obama administration's call for a massive economic recovery program, but argue that to succeed, this program must focus on raising the incomes and security of the vast majority of Americans who have been sidelined from power in recent decades.
"The PERI statement spells out in some detail the types of changes that should be made, including much stricter regulation of the financial system, the permanent nationalization of Fannie Mae and Freddie Mac, and pro-labor policies that would enable employees to increase their wages and living standards," Moseley said.
The economists recommend, among other things, that Congress hold public hearings on the causes of and solutions to the current crisis, "to broaden the discussion and make it more democratic," said Moseley. Such hearings would serve as "a means of public education," and there is precedent for them, he noted.
"The Pecora hearings conducted by the Senate Banking Committee in 1932-1934 helped to build the framework for the financial regulation of the New Deal," he said. "What we need is (a modern series of) Pecora hearings, but even broader than that."
In the "Progressive Program" statement, the economists develop an interlocking set of initiatives that include: 1) a massive fiscal expansion program centered on aiding state and local governments, keeping people in their homes, creating green jobs and public infrastructure, protecting key industries, and instituting government employer-of-last-resort programs; 2) economic policies to end extreme inequality and restore a balance of economic and political power to labor, households, and communities; 3) programs to reconstruct, regulate, and manage financial institutions so they will serve people's needs and contribute to financial stability; 4) international macroeconomic and financial coordination to make the transition to a fairer and more balanced global growth regime; and 5) a set of comprehensive and open Congressional hearings on restructuring the financial system, along with the rules, institutions, and public oversight mechanisms through which it functions.