Rewire the Economy to Prevent Future Crises

Something needs to be done immediately to help those who are losing their jobs as a result of the economic crisis. Likewise, we need to make sure that the incoming administration cures the disease of the crisis- and doesn’t just treat its symptoms. There are a few basic changes which, if adopted, will address both these issues at once:

• The Federal Reserve Board should take on the responsibility to combat financial bubbles.
• A modest tax should be imposed upon financial transactions in order to minimize short-term speculative economic activity.
• The rules of corporate governance should be amended so that shareholders must approve of top executives’ compensations packages.
• The value of the dollar should be lowered in order to make American products cheaper in international markets. Not only would this help bring the US trade deficit down to a manageable level, but it would also generate more manufacturing jobs for those who’ve been worst hit by the crisis.

Dean Baker, Center for Economic Policy Research