(Article changed on October 24, 2012 at 06:46)
In the endless swirl of headlines about the current global financial crisis, the dominant narrative, which is also driving the 2012 U.S. presidential election, is that crippling amounts of public debt run up by profligate government spending have brought us to the brink of financial ruin and must be offset by deep cuts in social services and "entitlements."
This patently false narrative masks the largest ongoing financial swindle in human history, a swindle being carried out at public expense by a small class of elite financial speculators. This speculative class has been unleashed over the past three decades by a Utopian neoliberal political project now embodied in its most virulent form, in the Republican presidential ticket of Mitt Romney and Paul Ryan.
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We are where we are today, in part, Tom Friedman says , because the merger of globalization and information technology has transformed how goods and services are bought and sold, made and designed. This merger makes old jobs obsolete ever faster and spins off new jobs rapidly. Problem is, all the good new jobs require highly skilled workers who are well educated in particular fields. And there are not enough of them.
As a country, we have, at least historically , ensured that our work force kept up with new technology by steadily expanding public education -- first universal primary education and then universal secondary education. But since the 1980s, when we needed to move to some form of universal postsecondary education to keep pace with globalization and I.T., we failed to make that move. Instead, our high school graduation rates stopped improving and our growth in college graduates slowed substantially -- far below what we need for rapid growth and shared prosperity. Academic standards in many community and state colleges fell as well.
Today, as a result, we have a major problem. While our workers ages 50 and over may be the most educated in the world, our younger workers are below the middle of the global pack for industrialized countries; and our national dropout rate remains outrageously high, around 25% -- one of the highest in the industrialized world.
How and where did we go wrong?
Instead of ramping up the education and skills training the country so badly needs, we created employment for our relatively unskilled workers, by way of a massive injection of subprime credit that created a large number of relatively unskilled home construction and retailing jobs. Meanwhile, Wall Street ballooned, in part by shifting from an industry that invested in innovative new firms, to an industry that funded the creation of unproductive financial instruments, by which some people made a great deal of money, entirely at the expense of the others who lost it. In other words, Wall Street, by and large, became a giant casino. And billions of dollars that could have been profitably invested, were instead squandered in the great new Wall Street casino.
In recent years, our job creation engines have been re-oriented: from competitive global markets to inwardly oriented sectors that were then taken to unsustainable levels, (e.g., construction, finance, housing and retail). The result was a badly unbalanced and vulnerable labor force. We also overdosed on debt and credit entitlement, spending trillions of dollars that had to be borrowed instead of derived from productive and societally beneficial enterprises.
In other words, we got seduced by the riches and rewards of financial engineering. Too little genuine economic growth, too much debt, and a Wall Street risk-(gambling)-culture gone crazy. Together, these things culminated in the very messy global financial crisis of 2008 and its aftermath -- a costly shock to society, the impact and penalties of which will be with us for years.
For quite some time, America has under- and mal-invested in education
As we slipped down global rankings (way down), we assumed that our traditional global edge in entrepreneurship and innovation could compensate for our declines in educational attainment. But that assumption was faulty in the extreme.
All of this came to a head during the terrible 2000s. The housing/credit markets exploded, creating a systemic banking crisis and a painful recession, which coincided with our sharpening education deficit, which coincided with two wars and a big tax cut for the rich that dramatically worsened our national deficit.
The result is a kind of deep hole we are in as a nation, and that hole now requires us (as soon as is practical) to cut spending, yes it's true. But of far more pressing importance, it requires us to:
* raise taxes on the rich;
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