realityeconomics

Wednesday, December 13, 2006

The Global Middle Cries Out for Reassurance

In Larry Summers first column for the Financial Times, dated October 30th, and entitled "The global middle cries out for reassurance", he said that economists rightly emphasize that trade, like other forms of progress, makes everyone richer by enabling them to buy goods at lower prices. But this offers small solace to those who fear their jobs will vanish. John Kenneth Galbraith was right when he observed: "All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time." Meeting the challenge of the anxious global middle is the economic challenge of our time. The best parts of the progressive tradition do not oppose the market system; they improve on the outcomes it naturally produces. That is what we need today. You can find this column and the dialogue at Martin Wolf's blog.

My response to Larry is as follows----many people in the middle are missing out on enjoying the benefits of asset building, which requires knowledge about the workings of the economy and financial markets. If we give this to them, unequivocally, for free, they can learn, and from there they can participate more fully by owning real estate, stocks and bonds. There is nothing better to relieve the angst of job loss, than knowing you have assets to fall back on. We need to encourage savings early from childhood; not when a person begins to work. Einstein said the theory of compounding interest was one of the most beautiful concepts. He was right.

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