By Harold Meyerson
We live in a time when there’s no such thing as purely good economic news. When the GDP surges – as it did by 4.8 percent in the first quarter of this year – something always lags behind, and that something is almost always the income of ordinary Americans. In that same first quarter, for instance, worker compensation rose by just 2.4 percent – half the rate (4.8 percent) by which inflation grew.
Save for the wealthiest of our countrymen, we are all of us laggards. The American economy booms; the American people are left behind. Once upon a time, in the period of great post-World War Two prosperity, median income rose at precisely the same rate as productivity (both increased by 104 percent between 1947 and 1973). Since then, however, productivity gains have outstripped the average American’s income by a rate of three-to-one, and in recent years, by eight-to-one. As Northwestern University economists Ian Dew-Becker and Robert Gordon have demonstrated, over the past couple of decades, all the income from productivity gains has gone to the wealthiest ten percent of Americans.
One economy vanisheth, another – a meaner one – taketh its place. GM and Ford announce they will close roughly 30 factories, while the median wage for newer hires among such industrial powerhouses as Caterpillar Tractor is now half that of their veteran workers. Or, to depress ourselves further, consider a survey of the nation’s 361 metropolitan areas, which account for 86 percent of the nation’s GDP. It found that the average wage of jobs lost in the recession of 2001-2003 was $43,629, while the average wage of jobs created in 2004-2005 was $34,378 – a cozy 21 percent decline.
Worse yet, it’s no longer clear that one of the lines that Bill Clinton frequently used in his 1992 campaign – “What you earn will be the result of what you learn” – is even remotely true, now that so much highly-skilled work can be sent electronically. Last year, economists J. Bradford Jensen of the Institute for International Economics and Lori Kletzer of the University of California at Santa Cruz concluded that within the service sector, it’s skilled workers in general and scientists, mathematicians, and engineers in particular who are susceptible to having their jobs off-shored. Indeed, over the past half-decade, the United States has generated just 70,000 new jobs in engineering and architecture. In such an economy, sending more people to college, while a social good in itself, may not prove an economic panacea. In 2002, the Bureau of Labor Statistics has concluded, 26.9 percent of all jobs in the U.S. required college degrees; by 2012, that will rise to 27.9 percent – one measly point.
The middle is falling out of the American economy. Globalization, immigration, de-unionization, the decline of manufacturing, and the rise of a financial sector and culture enamored solely of shareholder value have combined to imperil one of America’s defining achievements – the creation of the world’s first majority middle-class economy. At the same time, they have also combined to negate virtually all our theories about how to create mass prosperity. Oh, there are things the Democrats could do in power that would have very positive effects. Nationalized health insurance would take a major burden off employers with older work forces and enable them to compete on a more level playing field with foreign companies whose health care costs are picked up by their governments. The minimum wage could be raised and indexed. Labor laws could be amended so that workers could feel free again to join unions without fear of firing.
But none of these changes would basically alter the DNA of American financial and corporate institutions, which ceaselessly impels them to disaggregate firms, out-source work, and find the cheapest labor in a world brimming with cheap labor. In such a world, generating broadly shared prosperity amounts to squaring a circle.
This is a crisis for the nation, and it is a particular crisis, and challenge, for Democrats and liberals. At bottom, the Democrats – and parties of the left and center-left across the planet – are parties of broadly shared prosperity. Since the days of Jefferson and Jackson, that has been the one defining attribute the Democrats have largely clung to (though there have been periods – the presidency of Grover Cleveland, for instance – when they have happily dropped it).
Today, there’s not a political tendency on the planet that has much in the way of plausible notions as to how to preserve mass prosperity in the advanced economies in the face of the new global realities. The long-term political consequences of this dilemma, however, may not be equally distributed among all political tendencies. The alternative to a politics of economic advancement is often a politics of social and cultural resentment. The steadily declining income of white working-class males over the past several decades, for instance, correlates to their increasingly rightwing voting habits. We may not be able to prove that correlation is causal, but I doubt it’s entirely coincidental.
In any given election, the inability to lay out a plausible scenario for renewing mass prosperity is not likely to leap out as the Democrats’ most glaring deficiency – particularly since the Democrats’ economics both are and are seen to be more friendly to the ordinary American than the Republicans’. But the objective reality of downward mobility, of the vanishing of an entire stratum of secure, middle-income jobs, creates a volatile political terrain on which nationalist, immigrant-bashing, union-hating demagogues may thrive. If Democrats can not assure broadly shared prosperity, a floodgate of reaction will at some point likely burst.
What, then, should the Democrats be advocating? I have three suggestions, in ascending order of difficulty.
First, when they retake power, the one action that could most strengthen their base, politically and economically, would be to enact the Employees’ Free Choice Act, which would enable workers to join unions without fear of firing. The new Change To Win Federation estimates that there are 44 million non-union private-sector jobs in such non-off-shorable sectors as construction, hospitality, transportation and health care. Over time, the EFCA could lead to the betterment of low-wage service sector jobs, just as the Wagner Act transformed over time the economic life of America’s industrial workers.
Second, they need to revive the idea of industrial policy. In such proposals as the Apollo Project (backed by unions and environmentalists), which would create tax credits for businesses that retrofit and become otherwise more efficient; or the consortium of Midwestern states (proposed by political scientist Joel Rogers and economist Dan Luria) that would improve the infrastructure of and give benefits to firms that in-source their supplies from the Midwestern region; or Barack Obama’s bill in which the government assumes some of the auto companies’ health care costs so long as they invest their savings in hybrid technology, we see a movement to shore up the nation’s industrial sector. The nation and the Democrats would profit by more such movement.
Finally, and here we move from the difficult to what may be the near-impossible, the Democrats need to disenthrall themselves from many of the values and mindsets of the financial community. They need more Eliott Spitzers and Phil Angelideses to ride herd on corporate abuses and to invest public funds with an eye to social responsibility. More sweepingly, they need to make corporate and financial institutions answerable not just to shareholders and top management, but to their employees and communities as well. Doing that will take a reform and redefinition of corporate power at least as sweeping as that of the New Deal. Given the increasingly dominant role of finance in filling the party’s coffers (the Rockefeller Republicans are all Democrats now), and in defining the party’s “responsible” economics, this will be anything but easy. But the grim reality is that in the age of globalization, American capitalism as currently practiced is eroding mass prosperity in the nation as a whole. In that contest, Democrats’ allegiance must be to their nation.
By Harold Meyerson