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News : US Economy Last Updated: Dec 8, 2011 - 7:22 AM


America's broken contract and sustainable capitalism
By Michael Hennigan, Finfacts founder and editor
Dec 7, 2011 - 8:42 AM

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On Tuesday, President Obama gave a major speech in a small town in Kansas, America's heartland and birthplace of his mother. He said supply-side economics is a failure and called “gaping inequality” across the country a moral shortcoming that is distorting American democracy. He was responding to the case that America's social contract is broken - -  an issue that challenges the sustainability of conventional capitalism.

Meanwhile in recent times, George Packer, a writer at The New Yorker and novelist, said that what is called "the mixed economy"; the term he prefers is "middle-class democracy, " was until recent decades an unwritten social contract among labour, business, and government -- between the elites and the masses.

In an example of the contrast between private wealth and public squalor, he says that last year, a Wall Street company that few people have ever heard of dug an 800-mile trench under farms, rivers, and mountains between Chicago and New York and laid fiber-optic cable connecting the Chicago Mercantile Exchange and the New York Stock Exchange.

This feat of infrastructure building, which cost $300m, shaves three milliseconds off high-speed, high-volume automated trades -- a big competitive advantage. But passenger trains between Chicago and New York run barely faster than they did in 1950, and the country no longer seems capable, at least politically, of building faster ones. 

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