‘Total rethinking of the economy is needed’

Chico State prof calls on communities to force change

SPEAKING WITH AUTHORITY<br>Professor Michael Perelman, shown in his office at Chico State, calls for communities to organize and gain leverage over corporate America. His 20th book is <i>The Confiscation of American Prosperity</i>.

Professor Michael Perelman, shown in his office at Chico State, calls for communities to organize and gain leverage over corporate America. His 20th book is The Confiscation of American Prosperity.

Photo By Bryce Benson

Shortly after a snowfall in Youngstown, Ohio, the soot from the pre-World War II steel mills stains the snow gray. The ancient mills are icons of America’s once-dominant steel industry and a symbol of a vicious market economy.

Michael Perelman grew up not far from Youngstown, across the Pennsylvania border just south of Pittsburgh. He remembers the soot-laced snow and seeing the effects the dying steel industry had on the small industrial town.

It was the era of “Morganization,” and all the major industries in the U.S. had been consolidated in the fashion J.P. Morgan pioneered when he bought up the railroads. Instead of investing in modernizing steel production, steel producers were more interested in buying up their competition, but when WWII ended, the rising modern steel industries in Europe, Japan and other countries stole the market.

“Arson became popular, as the people of Youngstown, Ohio, were hostages to the inefficient steel industry,” Perelman said during a lecture last Wednesday (Nov. 19) at the Chico Peace and Justice Center. He spoke of the current financial crisis and made a call for community engagement to mediate the cyclical economic battle between speculation and depression.

“Back then, we were not sitting in a room listening to old professors talk; we were out in the streets organizing and scaring the establishment,” he said. In his latest book, The Confiscation of American Prosperity, he details why Americans need to organize to gain leverage over corporate America and force changes in regulation and behavior.

A Chico State professor since 1971, Perelman argues in his 20th book for restructuring the economy. He calls not for a modernization in capital but a modernization in thought.

“In the longer run, a total rethinking of the economy is needed,” he writes. “Economists can make a contribution to this transformation by de-emphasizing competition, while learning to understand more humane motives of behavior than profit maximization.”

Depressions are merely the intensification of competition, Perelman says. The resulting economic inequality leads to financial instability. The recent housing-market collapse, banker bailouts and cries from Detroit are just the latest examples of how businesses and their employees suffer during such a period.

The crisis is systemic from the 1970s, the end of the “Golden Age” of post-WWII prosperity, he writes. Weakened corporate regulation and taxation fueled inequality, which not only disrupted economic growth but also allowed for the erosion of the middle class and explosion of wealth by the upper class. Today, he said, the top 13,000 taxpaying households represent 9 percent of the total gross domestic product.

Yet, from 1970 to 2004, the average income for 99 percent of Americans remained relatively unchanged: $36,008 in 1970 and $37,295 in 2004, adjusted for inflation.

In closing last Wednesday, Perelman was quite blunt.

“We’re screwed unless we organize.”