Massachusetts Daily Collegian

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A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

Economics professor discusses the past, present and future of the U.S. economy

According to Stephen Resnick, a distinguished  professor of economics, America is a consumerist society and “advertising is its religion.”

Resnick gave a talk titled “Contending Interpretations of Economic Crisis: Neoclassical, Keynesian, and Marxian” as part of a “Pizza & Prof” event put on by the Commonwealth Honors College Tuesday night.  He spoke about the current economic crisis in the United States, while discussing neoclassical, Keynesian and Marxian theories.

With the rise of consumerism, Resnick said, consumption became equated with success. He said consuming more from higher wages creates the understanding among people that capitalism delivers more consumption. Because of this common understanding, he said, capitalism often escapes scrutiny because “people are not conscious that they add more to the value than they get back.”
He likened capitalism to “a unique and wonderful machine.”
He said that capitalism has two features: it allows a society to reach its full economic potential and it produces what he called harmony in society between buyers and sellers. He said capitalism has a defect when it runs too slow – a recession – and when it runs too fast – inflation.
Resnick talked about the current debate over what type of control the U.S. government should have over a capitalist society, but said there is less talk about questioning the system of capitalism itself.

The bipartisanship conflict in the government is a matter of neoclassical versus Keynesian theories, according to Resnick. He said the Democrats favor a more Keynesian approach with high government regulation, and Republicans the laissez-faire neoclassical approach.
He said some think President Barack Obama faces criticism that he is waging a class war by taxing the rich to help the poor. Resnick said this criticism has the wrong target. He said there is a class war, but it’s a war against the masses. He called it a “war of few against many.”

He argued that the country has seen a depression of wages. “The economy has been wildly distorted over the last 40 years,” he said, adding that he is hopeful for change in the future.

He spoke about the distribution of profits among corporations and suggested all those that produce for a company should have the right to receive the profits and decide where they go. He emphasized what he saw as the importance of economic equality alongside political equality. He recalled the various struggles for political equality – like the women’s suffrage movement – but said he thinks there needs to be a push for economic equality.

During the talk, Resnick distinguished the contending theories of economics. The neoclassical theory, he said, mandates a laissez-faire approach, which he said stresses that maintaining involvement of the state will make matters worse.

Marxian economics, he said, states rising profits and wages can be a measure of class exploitation.

And Keynesian theory, according to Resnick, favors federal interventions to solve problems to restore harmony.

Resnick explored the current economic situation in America and estimated unemployment is closer to 20 percent if part-time workers and people recently unable to work are added into the equation.

During the lecture, Resnick produced a graph displaying rates of wages, profits and consumption from 1890 to 2007. His graph showed wages increasing by 1.8 percent from 1890 to 1970 and profits increasing by 2.3 percent. Then he showed the results from 1970 to the present which, according to him, showed the wage line dropping and productivity still rising. The line designating consumption steadily increased from 1890 to the present, according to his graph. He attributed the wage drop to a decline in American standard of living. He attributed the steady rise in consumption to the ideal of the “American Dream,” with people consuming at all costs to maintain the status of “success” associated with consumerism, he said.

Resnick’s analysis of the graph stated that there was accumulation of capital that raised profits and productivity. He also said investments in research and development helped raise productivity, as well as investments in intangible assets of management. He also said the ability for corporations to sell to merchants such as Walmart and Target allow them to remove themselves from the risk of the market and sell product faster.

He produced another graph showing what he said is an increase in income that the top decile of families in the U.S. share. The top 10 percent of families making more than $109,000 a year, his graph presented. In 1920, the share of wealth for these families was 45 percent, according to Resnick. The number then fell in 1940s, he said, and then flattened out to later drop in the 1970s and then go back up to 49.7 percent in the present period.

A student participator in the crowd during the discussion asked Resnick what Karl Marx would do with the current economic situation. Resnick replied by saying he thinks Marx would say the vast majority of people who work get no say with what is done with profit.

“Marx would say that would need to change,” said Resnick. “I hope that’s what he would say.”

Resnick ended the discussion by saying that he hopes the future will bring about change in the economic system in the U.S. and, he said, greater economic equality.

Nancy Pierce can be reached at [email protected].

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