Marie Duggan and Sam Osherson: What we wish Elizabeth Warren would say to voters

  • Sen. Elizabeth Warren, D-Mass., speaks during an organizing event at Manchester Community College in Manchester on Jan. 12. AP

Published: 1/27/2019 12:30:01 AM

When is a strong economy not a healthy economy? Right now in New Hampshire and in the rest of our country.

Our unemployment rate in New Hampshire is low, yet the workforce is demoralized by constant changes in business ownership and by wages that are not high enough to pay for health insurance, car payments and rent. The opioid crisis – and so-called “deaths of despair” – are linked to these economic inequities.

Sen. Elizabeth Warren understands that our largest corporations are diverting resources out of the communities where profits are made, and stifling competition. She has a proven track record of holding corporations and regulators accountable. We wish she would talk directly to voters about what is happening in our country, because as a precision manufacturing center, New Hampshire is at the eye of the storm.

Sen. Warren recently spoke to a large audience in Claremont as part of her swing through our state. She spoke about the shutdown, climate change and immigration. However, she could have spoken more directly about the economic crisis here in New Hampshire, since she may have real answers to the challenges we face.

In Claremont, Sen. Warren was passionate about the tragedy of immigrant children being held in cages at our southern border; she could have been equally passionate about New Hampshire kids who are raising themselves because their parents are addicted to heroin.

Claremont is one of the districts that flipped from Obama in 2012 to Trump in 2016, and it is ground zero for what can happen when publicly held corporations buy out local independently owned companies. Local companies (such as Whelan in Charlestown, Hypertherm in Hanover or Moore Nanotechnology in Keene) continue to produce extremely high-quality products and to employ quite a few people in jobs with security where employees and their work are valued. What happens when there is generational change?

Too many times, conglomerates or private equity take over a place like Whelan, and the distant corporate owner takes profits from the firm but doesn’t reinvest in it. Instead, the distant owner diverts the local plant’s profits to make its stock price rise, which will please hedge fund investors but destroy the economies of towns like Claremont and Charlestown.

Is an economy that fosters inequity really strong?

Part of the problem is the incentive structure: The executives of publicly held corporations are largely paid by stock options, and so they have incentive to use plant profits to make their stock price rise. In recent years, 83 percent of profits at publicly held firms went into dividends or stock buy-backs.

Corporate profits, prudently reinvested, can be a source of economic renewal for communities. That’s the way it was for decades in this country. Things have changed, as made clear by William Lazonick in his 2014 article, “Profits Without Prosperity,” in the Harvard Business Review. Lazonick reviews how it is that our economy is strong and the stock market is booming but most Americans are not sharing in the wealth. The culprit is executive pay and the incentive system driving the startling economic inequality in our country. He writes that, “If the U.S. is to achieve growth that distributes income equitably and provides stable employment, government and business leaders must take steps to bring both stock buy-backs and executive pay under control. The nation’s economic health depends on it.”

Hence the need for responsible representatives such as Sen. Warren to hold regulators’ feet to the fire to change this incentive structure.

Economic despair and the opioid crisis

The opioid crisis is connected to the economic crisis in New Hampshire and in our country. Parents become addicted for many reasons; economic stress and despair is among them: laid off from a job they had made real sacrifices over the years for, or perhaps when they turned 18 they found no place where society wanted them – no job, no future – or they tried to supplement income by selling drugs, since no job paid enough to raise kids. Or they just struggled so long with two jobs they got discouraged and wanted to blank out the pain.

Children in New Hampshire are waking up in houses where the parents are passed out, where there’s no food. The parents are at risk of overdose, and these parents do love their children. A parental overdose death is a tragedy that then ripples down the generations as the children try to deal with the trauma.

What Sen. Warren understands: Reforming corporate governance

Elizabeth Warren is ideally situated to talk about the economic inequities threatening our social fabric since corporate governance is her forte. Talking about immigrants, college education and health care – well, every Democrat will do that. But none of the other ones can say with such authority that they are going to hold corporate America accountable, and change the rules so firms have incentive to invest in their companies rather than use them to simply satisfy their institutional shareholders.

Sen. Warren has a proven track record, having helped to create the Consumer Financial Protection Bureau and having worked to strengthen Dodd-Frank and other financial oversight initiatives.

Skeptical readers should view the clip of Sen. Warren holding Wells-Fargo CEO Tim Sloan accountable for fostering a culture that encouraged employees to create 2 million fake accounts that wreaked havoc on many people’s finances (link: cnb.cx/2wwB9J2).

Sen. Warren understands that if we want the healthy economy that we desperately need, corporate governance must change. She has the policies to make this happen. And she has the courage to say so directly to the power brokers in large corporations.

We urge Sen. Warren to use the realities of our N.H. economy to show how her ideas and legislation would address the ballooning economic inequities and social stress that our state, country and world face right now.

(Marie Duggan is a professor of economics at Keene State College. Sam Osherson is a psychologist living in Nelson.)




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