The fundamental problem that ails this country’s economy is the steady decline of the Middle Class – in numbers, well-being, and crucially, in spending power. The rapid rise of the US in the 20th century was fueled by vibrant middle class demand that gobbled-up the products of an expanding business sector – from suburban houses, to cars, to appliances, and onward to leisure products. We made stuff and built stuff – as diverse as skyscrapers, roads, rockets, and the majority of the world’s great universities.
Of course, the US was abetted by world wars whose massive destruction that barely touched our shores. Industry expanded to supply our allies and then our own war machinery – usually in ways that could be converted to civilian uses upon conclusion of the hostilities. And it’s of unquestioned advantage to be the last economy standing, with much of the rest of the world’s capacity in ruins.
The US also stood for innovation. As recently as the 1990s, its systems were poised to lead a post-cold war world economy into unprecedented prosperity. In his brilliant book, “The Lexus and the Olive Tree,” Tom Friedman crowed that if you set out to design an economic engine that would power a globalizing world, it would look a Lot like this one. The title of his most recent, less brilliant tome laments “That Used to be Us.”
UC Berkeley’s Robert Reich has been an early seer of many trends – most recently, he has been the best analyst of our current economic travails – he even anticipated the rise of Tea Party AND the Occupy movements from opposite ends of the political spectrum, in his book “Aftershock:”
“…Widening inequality, coupled with a growing perception that big business and Wall Street are in cahoots with big government for the purpose of making the rich even richer, gives fodder to demagogues on the extreme left and the extreme right. They gain power by turning the public’s economic anxieties into resentments against particular people and groups. …willing to sacrifice overall prosperity for the sake of achieving their ends, such demagogues and the movements they inspire can cause great harm” (pgs. 127-8 for those of you following at home).
Does that sound like any of the current and emerging crop of demagogues? It does to me.
But even Reich is woefully long on diagnosis, and short on cure. Only twelve pages of 174 go to remedies – and his prescriptions mostly offer Progressive financial policies that would send The Right straight into cardiac arrest.
Nobody is talking effectively about The Big Question: how do we restore the great American Middle Class? The GOP? Their candidates stand for tired, cynical blather about tax rates and regs curtailing the noble Job Creators from their appointed rounds. C’mon folks – historically low rates haven’t shaken loose those jobs, and captains of industry, being sophisticated human beings, are motivated by many, many things other than just money. Regulations that keep us from choking on our own fumes didn’t just happen, either. Their roll-back would serve the selfish needs of well-heeled contributors who don’t have to breathe those fumes, but do not a thing to address real problems.
The Dems, to their limited credit, are at least seeking to prime the economic pump with stimulae like the Jobs bill. That may be good counter-cyclical policy that responds to the recurrent fluctuations in a healthy economy, but it doesn’t address the Big Picture either – our enduring, festering structural problem of the decimated Middle Class. We cannot promote permanent prosperity by cutting each other’s hair – it does not add permanent value to the system.
Nobody is talking about IT precisely because IT’s an incredibly difficult, and maybe impossibly large, problem. The US needs a renaissance that will require huge, disparate and coordinated elements from many places in the culture – some short term and others very long term – and none of which will get anybody (re-?)elected next year. Both Parties are serving us stale burgers, hold the meat.
Next week, I’ll take my best shot at some answers – and you can poke ‘em. In the meantime – what are Your suggestions of a top two or three things America ought to do to address the fundamental structural problems of the “hourglass economy?”