Wednesday, December 13, 2006

Assuaging the Anxious Middle

On Monday, December 11th, Larry Summers posted another column to the FT entitled "Only Fairness Will Assuage the Anxious Middle". ( In this column, similar to the first one on this subject published October 30th, he outlined the problems of the anxious middle class in a globalized economy, and offered suggestions, and solutions. He said that policymakers in responding to their constituencies over the election results, must not forget that globalization has enabled the US economy to enjoy the favourable combination of low unemployment and low inflation of recent years, and that without open markets, product prices would be rising much faster, further attenuating living standards for middle class families. He said "if the anxious middle's concerns about fairness are this serious when the unemployment rate is 4.4% they will be far greater whenever the economy next turns down." Well said. He then remarked, "this puts a premium on finding measures that go with the grain of the market system while also responding to concerns about fairness." Larry's solution: restore the progressivity of the tax system.

However, there is even more Congress could do to enlighten the masses on savings, and accumulating wealth. They could provide from K to 12 economic education, and financial literacy, so that every student obtains the knowledge they need to survive and thrive in the capitalist system. Remembering the words of Alan Greenspan in his speech on Education at Boston College, March 12th, 2004---he said "To be sure, a hallmark of our market-based economy has been that we have placed much greater emphasis on the need to provide equality of opportunity than on equality of outcomes. But equal opportunity requires equal access to knowledge. We cannot expect everyone to be equally skilled. But we need to pursue equal access to knowledge to ensure that our economic system works at maximum efficiency and is perceived as just in its distribution of rewards." Once again, we come back our main theme: if we provide access to knowledge about the workings of the economic system, and financial markets, we will have more informed, and knowledgeable citizens who can participate more effectively in capitalism. This is an idea whose time has come.


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