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.
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“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.”
Poor Mr. Meyerson. What he means is “Today, there’s not a political tendency on the planet that has much in the way of plausible notions as to how to preserve the enormous disparity between the advanced and emerging economies in the face of the new global realities.”
Large parts of the rest of the world (mostly, India and China) are getting richer. Is this a bad thing?
Family income levels in the U.S. today are much higher than they were in the fabulous fifties. They just aren’t increasing as rapidly. The “middle” is disappearing, not because people are getting poorer, but because they’re getting richer. The top half of the U.S. population live lives of comfort and even luxury, the kind of lives that only the top 10 percent enjoyed not so long ago. These are the people who vote, and this is why Democrats, when they follow Mr. Meyerson’s advice, keep losing elections. The Great Depression ended a long time ago. Running as FDR isn’t going to work.
After reading Mr. Meyerson’s column, I have the following comments:
1) While I understand Mr. Meyerson’s outrage, his solutions are unworkable. For one thing, he says we should unionize workers in construction, healthcare and transportation industries. Then he also says that we should have the government pick up the cost of healthcare. Does he not see the folly here; increased unionization will result in 2 things, first, the medical employers will use more non-domestic labor and/or labor saving technologies which will mean they can bypass the unions; but second, even assuming they didn’t do this, the costs of increased wages would fall on the new payor for such services, the federal gov’t, which will then be passed on to taxpayers.
2) The transportation sector, as currently constituted, is populated by independent contractors. As someone who has worked in banking, I can tell you that the people I have met in long haul transport are not starvin; there is a shortage of long haul talent, and the wages in that industry (if that is even the proper term to use, since most of them are self-employed) have increased faster than inflation. Even where there is employment relationships, such as with UPS, FEDEX and The Postal Service, two of those three are unionized, and one of them is a gov’t corporation. They have higher than average wages already. But, like most unionized jobs, the only result tends to be that employers in such industries, as well as the currently employed of those companies, would rather pay existing workers overtime than hire new full-time employees. Again, employers are not stupid; they know there way around anything you can throw at them. Even FEDEX, though not unionized, does this, because they have seen the wages of its current employees increase faster than inflation.
3) As for the construction and hospiatilty business, these are very localized industries, as they should be; no one I know in Houston or Minneapolis would pay $300 a night for a 2 star hotel in a bad neighborhood as they do in NYC (where many, if not most, hotel employees are unionized). And, if you increase wages in construction, would you not increase the cost of housing as well? Again, you seem to assume that such costs will all be bourne by the employer/business, but it will not. Society will pay the costs in one of two ways: by a reduced supply of housing, that is affordable, or by increased unemployment in the industry as unions do what they always do; discriminate against workers unwilling to play ball. This goes to my final point. Everyone who has any knowledge of history knows that one of the reasons for the unions downfall was there corruption and there racist policies. Hell, the AFL wouldn’t even allow jews in even though Samuel Gompers was half jewish! They were very discriminatory against african-americans and recently arrived immigrants from southern europe. The CIO was more open to these groups, and it is because of them that the certain manufacturing and mining industries were unionized, as well as service businesses. Also, let us not forget the Teamsters, and the Mafia; the Sopranos is not all BS, especially when it comes to its descriptions of unions and city construction contracts in the Northeast. Everyone knows this. This is why the mafia never got big outside of the northeast and midwest, because the west and South were right to work areas, with a heavy concentration of gun ownership (same goes for Michigan, while not a southern or western state, shares a lot in common culturally with the south and west). Only New Orleans and Saint Louis have a mafia concentration, because they have heavy unionization in the shipping businesses, as well as corrupt political machines.
4) So what are some solutions that could work? First, we need to improve our education system in this country. Mr. Meyerson points to gov’t statistics which point out that only 27.0% of future new jobs will require a college degree, but like many left wingers, he is myopic. This assumes that all technological progress will end now. Do you really believe that? I hope not. We need to better our schools so that Americans, and not Chinese or Indians or Russians, invent the new technologies of the 21st and 22nd century. This is the race we are in. Secondly, we need to rethink this whole trade agreement lovefest we are in. Trade agreements are nothing more than giveaways of our sovereignty as a nation to corporations and to multinational institutions. These groups have two things in common; they do not like us, and they are not within our control. We as citizens have no say. Our congress has relinquished power to these institutions. It is ridiculous. There are many things we as a country cannot do because they violate NAFTA or GATT. This is bs, and we should not be putting up with it.
Third, if we did the abve, we could then focus our attention on trade and insustrial policies, such as tariffs on steel imports (which actually worked, contrary to George Will and Joe Klein, the numbers prove it) and other such industries that are of strategic importance. We should not be dedicated to dead scientists who lived in libraries (aka “economists”). Even Schumpeter believed that it was folly for a government not to do this, and he is foremost advocate of “creative destruction” theory of economics. Finally, we need to change the tax code in this country. We need to bring back the Estate Tax, and get rid of the payroll tax. The payroll tax reduces the income of average Americans. We should replace it with tariffs and/or a sales tax. This would also remove the costs of compliance with payroll tax regulations that are businesses have to incur. And, as with the financial sectors influence on the economy, you have to be realistic; there is no country on earth that does not have a dominant financial sector of its economy. That has been the case from the beginning of time, every since the rise of western europe (The Medicis of Milan were only the first, You have also the Safra’s of the Ottoman Empire, the Rothschilds of France and Germany, and the Morgans of the US). Without a dynamic financial sector, you would have an inflexible economy. But, again, if we removed ourselves from the whole world trading system cartel that exists, the ability of the financial conglomerates to control the economic decision-making of our country would be reduced. There is much more that I could write about, but I will stop for now to read more posts.
Yes the middle class is being driven into the dirt. But this only further serves the interests of the Bushites.
In this regard it is instructive to review the writings of Eric Hoffer, the long shoreman philosopher who focussed on the development of mass movements.
As people lose hope for ever owning a home, affording health care, sending their children to state college or having a respectable retirement, they lose their self respect along the way. Once this has happened, they are ripe to latch on to a cause outside themselves which has a grand construct. The message they hear doesn’t have to be rational, just consistent.
This is why, through the destruction of the middle class, we are providing new converts for the Religious Right and radicals who will follow a demagogue.
I believe that our only hope is to explain simply and clearly to the middle class, that the Bushites are taking them for saps.
Then we need to show the way to break the corporate chains on our Democracy by initiating public campaign financing. This can be achieved without any changes in our laws in at least two ways. The DNC could set up a fund which is committed to furnishing campaign financing to candidates who are squeaky clean and commit to giving highest priority to our dependence on imported oil and to runaway healthcare/retirement costs.
Alternatively, an organization could be set up which recommends such canidates, but a system would be set up where contributions flow directly to the chosen candidates.
Once we have control of congress and the Presidency, we can realign the tax system to bring wealth back to the middle class, much as was done under FDR. We can subsidize solutions to our dependence on imported oil and runaway healthcare/retirement costs. The industries we create by doing this represent the largest industrial base to be created in the first half of the 21st century. We will be investing hundreds of billions of dollars to solve problems which would otherwise cost us tens of trillions of dollars.
With the resulting growth in the job market for the middle class, we can finally restore the basic hope that our country was founded on — that each individual, no matter how humble, has a shot at success.
Harold,
It’s always refreshing when I read another major Democrat who is clueless about economics.
Your 3 proposals are laughable.
(1) Enable unionizing. If you do, then forget…
(2) Industrial policy. The major reason GM and Ford are no longer competitive in the global market is the high salary and benefits paid to both white- and blue-collar workers. The fully burdened cost of each blue-collar employee is about $65/hour. GM & Ford are competiting in a global 100-meter-dash with lead weights tied to their feet.
(3) Penalize corporations. Is this your “industrial policy?” What is the deal? I’m confused. Do you plan to aid or eviscerate corporations?
Regarding income inequality. You make 60K, & I make 100K. You get a 25% raise to 75K, and I get a 20% raise to 120K. However, our income inequality has increased.
Income inequality per se is not the issue. According to the CBO, 80% of households had higher adjusted-for-inflation incomes during the period 1979-1997.
Unions are anachronisms. The federal government already overly interferes with the healthy functioning of the free market. If we want to win the Globalization war, we had better not cripple our corporations.
You advocate nothing more than continued class warfare, despite the seeming erudition of your article.
But, I’m happy that you are clueless about basic economics. Being do guarantees your permanent minority status.
2006 marks 25 years of the Reagan Revolution, which has produced the first generation of Americans who are poorer than their parents and an ever-widening income disparity. Trickle-down wealth? We have proved that money defies the laws of gravity and surges upward. Democrats should be screaming these facts.
Regarding the ideas for action.
(1) Enable unionizing. Let’s face reality here. While unions of the past have brought many modern benefits, most unions now are considered to be part of the problem, not part of the solution. Unions encourage the “us versus them” mentality of outdated corporate structures. Corporations that have learned to integrate their workforce into their decision making process far well; ones that do not, whether union or nonunion, do not survive. Bad management kills companies, and as much as the government would like to help, there is nothing that can or should be done unless you want to turn an independent company into a subsidized psuedo-national institution. The American automobile industry is an outstanding example of this, as is the NY Teachers Union. The GM experience is a painful lesson for well-intentioned liberals.
(2) Industrial policy. Perhap I am misunderstanding the author, but part of the real problem facing America today is the fact that the government is interfering in business TOO MUCH, not too little. Subsidies, tax breaks, government contracts, all conspire to reduce the health of American businesses.
(3) This appears to be focused on insiders as I found it essentially unintellible as written. But for what it’s worth, be assured that the average citizen does understand basic economics and knows when a company is getting too sweet a deal. The Democratic Party should not be afraid to point such instances out (“Yes, company X is bringing Y jobs to your community, but are you aware that it got Z in tax breaks which not only is unfair to any competing business but also puts the burden of healthcare, roadway maint, etc onto the shoulders of the individual taxpayer?” or “Yes, X jobs have been created in the last year, but of those jobs, only Y are unsupported by government subsidies or contracts”).
This item overall is most useful. I am particularly pleased to read Mr. Meyerson’s last paragraph where he says:
“… Democrats need to disenthrall themselves from many of the values and mindsets of the financial community…”
This caught my eye because nearly 2 years ago I had a brief back and forth with the author in response to a Washington Post column of his that I found overly effusive in its defense of financier George Soros from some GOP attacks of the day.
There is an unfortunate widespread tendency to think that since so-called “globalization,” is the current world economic system, that its existence is somehow a permanent immutable law of the physical universe. Nothing could be further from the truth and continued acceptance of that system can only lead the nation and the Democratic Party to despair. Systems come and systems go.
Let us bear in mind that in 1945 FDR constructed a new post-war system, that, together with the New Deal’s social safety net, was responsible for the “mass prosperity” that Mr. Meyerson praises. Along about 1971, Pres. Nixon–under the influence of George Schultz, more recently the eminence grise of the Bush-Cheney Vulcan Administration–destroyed that FDR system and replaced it with a floating exchange-rate, wildly speculative system that has come to be called “globalization.”
I would submit that it is time for an aggressive push to erect a new system that corresponds to our values–a kind of FDR counterrevolution against a Nixon era atrocity–an atrocity of ‘globalization’ and instability that is leading the world straight to hell as its many financial bubbles unravel.
The reality is that most households in this world have become poorer under ‘globalization’ with the exception, of course, of folks like Mr. Soros and the lower profile Felix Rohatyn–the architect of the takedown of NYC city services in the 1970s and the more recent sham-bankruptcy-for-purposes of-outsourcing of GM supplier Delphi.
To the extent that Dem candidates are seen as going along with such a system they earn the distrust of the much commented upon ‘angry white males’ and the rest of the 70-80% of Americans who are more likely living on their debt than their income.
Disgust with the GOP in DC, only barely outstrips the disdain that the public directs at ‘wimpy’ Dems who are widely perceived as unwilling to fight for the future of their poor and middle income base, because they are too busy soliciting the Soroses and Rohatyns of this world for campaign cash. (This, incidentally, has everything to do with why the much-ballyhooed ‘GOP culture of corruption’ slogan falls so flat.)
If we don’t rediscover the ‘people’ and their ‘common good’ we are likely to make the despicable Mr. Rove look like a genius again, and put our republic in mortal peril.
HERE ARE SOME OF MY PERSONAL BELIEFS FOR THE DEMOCRATIC REVOLUTION: THE DOMESTIC AGENDA
IMMIGRATION:FORCE THE CURRENT IMMIGRATION LAWS WE HAVE, AND HOLD VICENTE FOX ACCOUNTABLE FOR MEXICO’S ECONOMY.
HEALTHCARE: UNIVERSAL HEALTHCARE FOR ALL AMERICANS. WE NEED TO HAVE THE FEDERAL GOVERNMENT BARE THE BURDEN OF HEALTHCARE COSTS AND TAX COMPANIES ON THE COSTS, RATHER THAN HAVE THEM PAY FOR THE COVERAGE.
EDUCATION: WE NEED TO HAVE A UNIVERSAL EDUCATION SYSTEM
WE NEED TO GET RID OF THE PRIVATE SCHOOL, AND PUT THAT MONEY INTO PUBLIC SCHOOLS. WE NEED TO GET ALL OF OUR CHILDREN TO “MINGLE” TOGETHER IN SCHOOL NO MATTER THE SOCIAL CLASS. THAT WAY THERE WILL BE NO SOCIAL SHELTERING. WE ALL WILL HAVE AT LEAST AN IDEA OF HOW OTHER CULTURES AND PEOPLE LIVE.
IN CONCLUSION:IF WE AT LEAST LOOK AT THESE OPTIONS TO SEE IF THEY ARE ACHIEVEABLE, WE WILL BE BETTER OFF AS A NATION AND COMMUNITY.
I AGREE WITH THE STRATEGY COMPLETELY. ALTHOUGH WE SHOULD ATTACK THE REPUBLICAN CULTURE OF CORUPTION, AND DEFEND THE STRATEGY. I THINK WE SHOULD CALL IT THE “DEMOCRATIC 3 POINT REDIRECTION TO DEMOCRACY”
WE NEED TO BE THE REFORM PARTY. WE NEED TO BE THE PARTY FOR THE PEOPLE AND BY THE PEOPLE. IF WE STAY FISCALLY RESPONSIBLE, AND ROUTE OUT CORUPTION, WE WILL BE ABLE TO BE THE PARTY IN CONTROL INDEFINATELY. ONLY IF WE STAY HONEST WILL WE BE ABLE TO STAY IN POWER. WE ALSO NEED A SOUND LEADER. SOMEONE WHO CAN BRING THE PARTY TOGETHER.WE’VE GOT A LOT OF WORK TO DO TO SAVE THE WORLD!!!!!!!!!!! (IN GOD WE TRUST!!)
May I suggest some more specifics…
Raise (and enforce) minimum wage, bringing it back to early 1970s real-value peak.
Make taxation simpler and fairer (not flat; fair and simpler):
Reinstate progressive taxation, including equal taxation on earned and unearned income (salary taxed same rate as capital gains, etc.). reducing exemptions, deductins, credits, loopholes etc allows one to be fairer and simpler. The simplisitc appeal of “flat” but with progressive gradations by income level.
Reinstate, without loopholes, real taxation on wealth, that is inheritance estate tax.
Get rid of separate regressive payroll deduction tax for social security and medicare. One simple income tax to cover all federal obligations and expenditures honestly.
finally… Immigration… enforce immigration laws by targeting the demand side of the equation, namely the employers (particularly the larger systematic one; not so much mom-&-pop outfits). They violate both immigration law and also workers rights. Politically can unite anti-immigrant populists AND immigrant rights lefties.