Listen: Noted Economist
Alice Rivlin on Saving Market Capitalism
by Maki Somosot '12
Alice Rivlin H'76
Instability and the inequality in the current capitalist market have led indirectly to the economic recession, said noted economist Alice Rivlin H'76 in a recent talk on campus. Arguing that the middle-to-low classes cannot benefit from equal opportunities, Rivlin particularly emphasized the importance of fairness in the market: "Poverty rates have risen with the recession and are unlikely to go down for a long time." Rivlin's solution is not to encumber the wealthy and successful, but instead to "improve access to education and training for the poorest." Rivlin, a fellow at the Brookings Institution, delivered the annual Bernie Saffran Lecture in honor of a beloved Swarthmore economics professor who passed away in 2004.
Most importantly, according to Rivlin, American society should not consider abandoning market capitalism. These systemic flaws in the market, she argued, only prove that fundamental economic reform is necessary. "The severity of the crisis and its aftermath gives us a chance to re-examine market capitalism and make it more stable and fair," she said. Rivlin proposed stricter financial policies to anticipate and prevent future market crises. "We must realign incentives so that markets work towards the collective good," Rivlin said. Her suggestions included capping credit card interest rates, enabling securitizers to retain some of their risk, and also introducing a "new tool" to control both leverage and interest rates for the Federal Reserve.
Rivlin also supports the need for health care reform to reduce government spending. But it will take a "coalition of the sensible" to repair the market, Rivlin said, where people in political disagreement must cooperate to balance regulation with risk-taking.
Rivlin serves on the Board of Directors at the New York Stock Exchange. She was the first Director of the Congressional Budget Office, and served as the Director of the Office of Management in Bill Clinton's cabinet. Rivlin was awarded an honorary laws degree from Swarthmore in 1976.