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I find the reader comments below the article, more insightful than the article itself. Some folks understand what is going on, others refuse to admit it to themselves.
We've had a bi-partisan consensus among the ruling class on expanding "trade". Trade has grown the pie (GDP), but all the growth has flowed to the owners of capital. Intuitively how could it be any other way: breaking down trade barriers means jobs are offshored to China, the Philippines, and Costa Rica. Labor, social, environmental costs are driven down. Then the goods/services are imported back here and we are still charged 1st world prices. Capitalist margins expanded. Real middle-class wages shrank.
A better trade policy for the working class would be to require capital investment (factories, jobs) as a condition of access to our market. Rather than transporting goods from China, transplant offices, plants and jobs. If you (British-, Chinese-, German- capitalist - - or Apple) want access to our market, then INVEST in our market. Or don't -- but don't expect to be permitted access to sell here. More jobs competing for American workers -- this WILL drive wage growth.
There are millions of back-office jobs which 'service' the American economy in India, the Philippines. Citigroup was big on doing this. I'm an American, living in America, doing business with an American bank --- why the devil can't Citi hire Americans for low-level phone service? A lot of the firms I deal with (Dupont, Chemours, Bekaert, etc) have offshored these jobs too. Its disgusting. A pro-jobs tax policy would penalize offshoring.
Similarly, we continue to import workers, legal and illegal, to further drive down wage "pressures" (i.e income). Econ 101: ceteris paribus -- the more you have of a commodity (labor) the lower the price.
Further technology is replacing human labor. This will only accelerate (driverless tractor-trailers coming soon!) The state levies taxes on human labor, but incentives its replacement by machines (accelerated depreciation). Tax policy should encourage employing people, and dis-incent their replacement by machines. If I and my employer have to pay 20-30% as income & payroll taxes, why not tax (for example) the check-out scanner a similar dollar amount, every year? Humans pay higher taxes for contributing to economic output than machines (which pay nothing). We should reverse that. -- Broaden the tax base --- tax business-machines (through their employers), and use those revenues to reduce the tax-rate burden of employing humans.
The above measures will all no doubt be decried by the Chamber of Commerce. But they've "won" the policy debate for the past 35-40 years. The result of their "winning" -- a bigger pie, with all those extra slices going to the top 5%, and diminished prosperity for the typical household.
Lastly, the Chamber of Commerce/Wall Street types always like to throw out the "freeing up Americans for higher-value added jobs, all of which require more education". That is such a massive red herring. News stories are replete with extremely well educated tech workers having their jobs offshored to India, or having to train Hb1 visa types. Its all about costs, not education. Further, there will always be a large segment of society for whom college is simply not a good fit.
There is a reason why Americans' median income has not grown -- the free-traders, and open-border types have won the policy debate, they "won", they got everything they wanted from our 'For-sale' politicians. How has that worked out for the typical American?
I think the genie is out of the bottle on this. Perhaps a gross simplification, but we used to manufacture things here because nobody else could. Well, the world has caught up in terms of this ability, and they do it much cheaper than we can. I've heard that China is now losing manufacturing jobs to even lower cost countries...so the cycle continues.
It's odd, but I remember the exact moment where the extent of this globalization hit me. I was in the Continental Presidents Club waiting for a flight, and read where IBM was offshoring a number of programming jobs. Offshoring...that was a new term for me at the time. And in the smugness of (relative) youth, I had thought that folks with an education and advanced skills were safe. Not so much. Even our xrays and CT scans are now read in Bangalore.
>> There is a reason why Americans' median income has not grown -- the free-traders, and open-border types have won the policy debate, they "won", they got everything they wanted from our 'For-sale' politicians. How has that worked out for the typical American?
If only it were as simple as that.
None of us would have wanted the opposite. Often left out of the equation is that offshoring has resulted in whopping economic advantages for all US families, arguably especially for middle-income-and-lower US families.
A real pity the below discussions are all restricted; they are highly enlightening and propose some policy solutions as well:
Modern newspaper graphics / data display is just so cool.
My hometown county was most prosperous end of the 1960s. I sure believe it.
You only had to read my post about the stagnation of wages since the 70s and the shrinking of the middle class. The trend will not change. The middle class will continue to shrink and become more fragile.
The USA won WWII but lost the peace. Germany and Japan build modern factories and had low employee costs and legacy costs VS the USA in the 60/70s. Then came the rise of South Korea and China to take even more high/med/low paying mfg jobs.
All these trade deals are a reaction to the above and are a desperate attempt to get/keep any jobs the USA could but ultimately they work against the US worker.
Edmond is correct - automation, artificial intelligence, the large population growth, and increased taxes will be the final nails in the coffin for the middle class.
Maybe Paul Krugman is correct though - the US Gov't isn't spending enough and should incur more debt to stop all this. (not)
None of us would have wanted the opposite. Often left out of the equation is that offshoring has resulted in whopping economic advantages for all US families, arguably especially for middle-income-and-lower US families.
If that was the case the middle class would not be shrinking.
Jeez, such a false choice; the two were never mutually exclusive.
Anyway, this is a seriously weak, low-information way of understanding how the economic world works. Imagine a US economy where chiefly for our own market and use we produced oil, cheese, meds, TVs, and cars, whether in union shops or not, and as a result they cost 3x what they cost, if not more. How would that work for consumers?
And infrastructure repair (ooh, more debt) is hard to outsource.
Jeez, such a false choice; the two were never mutually exclusive.
Anyway, this is a seriously weak, low-information way of understanding how the economic world works. Imagine a US economy where chiefly for our own market and use we produced oil, cheese, meds, TVs, and cars, whether in union shops or not, and as a result they cost 3x what they cost, if not more. How would that work for consumers?
And infrastructure repair (ooh, more debt) is hard to outsource.
jeez, talk about a straw man argument!
Why stop at your baseless 3x cost; why not may it 10x and really solidify your position. No one would be able to dispute you then! (Why the hate for union workers? You should be happy to know that union participation has fallen to a 70 year low of 11.9% & more then half of those are gov't workers.)
So, in your economic world the worker with stagnating pay and decreasing/eliminated benefits (e.g. defined pensions, employer paid health ins.) should be grateful that for cheap imported goods to numb them from the misery of their lives.
You infer waaaaay too much and almost all of it wrongly, at least in this post, not in some of your others. Odd for someone who says he has worked in the news. As a member (long ago) of the AFL-CIO who worked on a truck factory line (Harvester), also a sometime public-schoolteacher, I have zero hate for union workers; where did that come from? Yes, many point out the decline of unions as being part of the problem. As for the rest, the costs of domestically produced goods is speculative to an extent but not hard to give a range. I imagine 3x for TVs is low, actually. Whom would that benefit really? As for wages and benefits, no one would argue against your points. You're just missing the macro picture, that's all. Trade protectionism would fix almost none of what you are on about.
The problem in a nutshell: Capital is global today while labor remains local. If the cost of labor locally becomes too high, capital picks up and moves to some other cheap labor country. So the miracle of globalization is wholly one-sided. Unless labor becomes global via a truly international labor union that can strike and collectively bargain across borders, Dex will have a valid point. Because the relationship between labor and management has rarely been so uneven as it is today and that playing field needs to be leveled somehow for the middle class here and elsewhere to have a chance.
Sure, we benefit from cheap imported goods, but one thing left out of that "benefit" is the tremendous waste it entails. People used to keep products for years or have them repaired if they broke. Now we live in a throwaway disposable culture with a lot of cheap often shoddily-made imported goods. What are the consequences to our environment of such a culture? How much landfill does it create and how much pollution in the manufacturing processes of disposable goods and in the shipping of goods thousands of miles instead of locally? And how much exploitation of not only our own labor force but of those labor forces in emerging countries providing us the cheap imported goods are we willing to tolerate?
People say that the sweatshops and child labor that exists overseas are just part of the normal life-cycle of capitalism as countries like China and India build their own middle class. But are they really benefiting from America's decline? Or are they too suffering? The pollution in those countries has become unbearable because of the manufacturing boom there. Click here: cnbc.com/2015/08/18/china-air-pollution-far-worse-than-thought-study.html And of course there is the larger question of climate change from that manufacturing and the emerging middle class. Can the world's environment really bear the brunt of more than one country that consumes and produces emissions like the U.S.? These are all tough questions globalization raises with no easy solutions.
As for the rest, the costs of domestically produced goods is speculative to an extent but not hard to give a range. I imagine 3x for TVs is low, actually. Whom would that benefit really? As for wages and benefits, no one would argue against your points. You're just missing the macro picture, that's all. Trade protectionism would fix almost none of what you are on about.
The macro picture is that the middle class has shrunk sine the 70's and lower cost TVs has done nothing to stop it. That is the point!
The other elephant we've left out of the labor equation is of course technology. Think about labor as a consumable good and the entire world's population as the available labor pool, which, thanks to globalization, it now is. Well, the supply of labor has grown astronomically, doubling since 1960--https://en.wikipedia.org/wiki/World_population#/media/File:World-Population-1800-2100.svg Meanwhile, the need for that labor to produce the fundamentals of life--food, shelter, etc.--has declined dramatically thanks to technology. In 1820 72% of the American workforce was in farming; today less than 2% is because of advances in agricultural technology. What that means is that we--and I mean this globally--are suffering from excess capacity. And the only way to address that excess capacity is to get people to consume more and more goods that are not essential to life, thereby producing more carbon emissions and exacerbating our climate change problem. That is the only way for all that labor to find work. Otherwise you see an erosion of livelihoods--unemployment spikes and the middle class dies.
I don't think Adam Smith when he conceived of the free market's invisible hand quite envisioned this scenario. The idea that if we just let the market work its "magic" everyone will eventually be happy ignores the problem of excess capacity we now face. Because the market is not an efficient allocator of resources when you're suffering from such excess capacity. Think of it this way: If I search Amazon.com right now, I can find 2,452 different kinds of plastic poop: https://amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=gag+poop Yet there are still many people who don't have enough to eat. That is symptomatic of excess capacity. The market will efficiently allocate resources only to those who have financial capital, efficiently pricing plastic poop and creating many different varieties for consumers with the money to buy it. But it is not an efficient allocator of resources for those without capital, namely the unemployed and thanks to technology, unemployable. They can't get enough to eat. Is producing so much poop--not to abuse the pun--wasteful of resources when some people are starving? I think it is. Is it wasteful when we have a major environmental problem on our hands? Yes, again. (The carbon "emissions" from making the plastic are bad for the environment as oil is plastic's feed stock.) But this capacity problem can't be addressed without admitting that the free market is not a panacea for all of the world's ills.
"And the only way to address that excess capacity is to get people to consume more and more goods that are not essential to life"
Essential to life or not: if more and more labor becomes "excess" (and I agree that this is a major problem in this equation) then obviously fewer and fewer people will have the disposable income to consume the required "more and more goods".
You folks understand that, as did Henry Ford, but because of the increased globalization of labor I believe that many of the broadly distributed (dare I say "trickle down"?) benefits which have historically been associated with increased global trade are no longer possible.
Lewis has also cited the connections between global manufacturing and increased environmental problems. This whole thing seems to me to be a very complex and interrelated set of issues, with no clear and easy fixes, and little or no guidance available from history. I believe that future historians will see the 21st century as the beginning of a major new historical economic era, with many of the previous rules and concepts becoming increasingly irrelevant to existence for the majority of people on this planet.
Unfortunately the world political and economic leadership seems to think that more of the same will somehow make everything turn out OK. I don't think so. I think that the entire world economy is on the cusp of a major tectonic shift. To what, I have no idea.
But have we long entered a state where tech development does not directly benefit the inventor? Sure.
This has been studied to death and with great sophisticated and recognition of no simple answers. It is all extremely complicated and unamenable to simplicity.
@Dex, I share all of your concerns, I think, every single one, strongly, even though I find your reasoning and handwringing not sophisticated or informed. Don't need anymore charts; I have read widely in this area, and the OP had plenty of data. I and my family, backward and forward, are part of the picture. What do you think should be done --- concrete policies? I believe I have asked this before of you.
@OJ, +1. And Ford knew he had to pay enough for his workers to buy the damn cars. This has already been pointed out many times.
@Dex, I share all of your concerns, I think, every single one, strongly, even though I find your reasoning and handwringing not sophisticated or informed. Don't need anymore charts; I have read widely in this area, and the OP had plenty of data. I and my family, backward and forward, are part of the picture. What do you think should be done --- concrete policies? I believe I have asked this before of you.
You only had to read my post about the stagnation of wages since the 70s and the shrinking of the middle class. The trend will not change. The middle class will continue to shrink and become more fragile.
Of course. Help us all out: again, what do you propose? Severe protectionism? Can you point me to what I missed? Or is it hopeless and we all simply must share your handwringing? That's weak.
Of course. Help us all out: again, what do you propose? Severe protectionism? Can you point me to what I missed? Or is it hopeless and we all simply must share your handwringing? That's weak.
You got it wrong! You are proposing that the trend can be changed.
A rock is thrown off the Empire State Building - it is falling - the trend is down. Science and history tells us it will hit the ground. I am agreeing with science and history.
If my appraisal is correct (or close to it), there may in fact not be any realistic immediate "fix". A read of Western history suggests to me that the present socioeconomic class structure, which we all regard as normal, is in fact anything but. It's what we all have been immersed in for our entire lives, so it's difficult for us to see that it is in fact pretty unique, historically.
Prior to the industrial revolution, there really was no such thing as a large "middle class". There was a fairly small class of merchants and tradespeople who generally were better off than the poorer classes, and of course a class of aristocracy: the "1%" is always with us, no matter where, no matter what. The industrial revolution roughly coincided with the exploitation of America, and in the case of the major European powers, the colonization of much of the rest of the world. It would be quite a stretch to believe that those colonized peoples had anything close to a native middle class.
America was a special and unique situation, well into the twentieth century. An entire continent, natural resources and riches beyond anyone's ability to measure, just lying there ready for exploitation using the immense new power of the industrial revolution's technological resources. Those resources may seem primitive now, but they certainly were anything but then.
The nineteenth and twentieth centuries saw the rise of the world's first real middle class. But those 150 or 200 years are just a blink in the unfolding historical timeline. And now, with the power of the industrial revolution all but negated by the immense power of modern international communications and transport technology, we seem to be entering a new phase of human socioeconomic evolution. It's surely true that the large middle classes of Western society are rapidly diminishing, but it's also quite evident that there has been a simultaneous compensating improvement in the living standards of many Eastern societies.
Anyone who thinks that we can somehow create a gated compound for the entire United States is living in a fantasy. For better or worse, like it or not, we have no choice but to continue to increase our commercial and political interface with the rest of the world. Historically, one of the last-ditch measures used by powerful nations to maintain or increase their commercial or political advantages was of course the military option.
Irrespective of the ethical issues, the present wide availability of extremely powerful military technology has removed even that option as a realistic alternative for the worlds greatest powers. So we have no choice but to try to adapt to the new challenges. How we do that, and how successful we may be, are really major unknowns at this time. There is no historical guide, and unfortunately there is not even a real understanding by the "1%" that we need to do anything at all. After all, they don't have problems, and they certainly are not responsible for the rest of the world's issues. If the rest of the world would only work as hard as they do, everything would be just peachy.
The middle classes know that something needs to change- and they instinctively resort (of course) to the men on white horses such as Trump, Cruz, and their ilk. Good luck to all of us.
So we have no choice but to try to adapt to the new challenges. How we do that, and how successful we may be, are really major unknowns at this time. There is no historical guide, and unfortunately there is not even a real understanding by the "1%" that we need to do anything at all. After all, they don't have problems, and they certainly are not responsible for the rest of the world's issues. If the rest of the world would only work as hard as they do, everything would be just peachy.
The middle classes know that something needs to change- and they instinctively resort (of course) to the men on white horses such as Trump, Cruz, and their ilk. Good luck to all of us.
>> what would you do to change the trend of the shrinking middle class?
Well, there are any number of policy changes that smart analysts and political thinkers, including some academics you relentlessly scorn, have advocated, in great detail and practicality.
This is not at all an unstudied area, in other words, not even close.
ACA is a huge start, low or free higher-ed tuition, more spending on public ed, wider community college access and institutions, enormous increases in preschool and early-childhood experiences, EIC expansions, guaranteed incomes the way so many other countries do it, much higher high-wealth taxation, vast infrastructure spending, and much more along all of those lines. Increases in SS and related benefits payments.
It is not mysterious, rocket science, inevitably prone to failure, crazily costly, or any of those things. It would take really persistent effort and argument. Completely doable. Likely? Not bloody.
In these matters I give zero actionable cred to Glubb, UCG and the bible, and all such faith- or scripture-based historical analogizing. I am however always stirred by Pasha's concerns about excessive wealth and power accumulation and the need for applied social love, not that those were original thoughts with him. The policy changes I refer to above would be a direct implementation of much of what Glubb prescribes. Again, this has been known for the longest time and regularly denounced as socialism and coddling and in direct opposition to the American bootstrap crap nonsense and myths so heavily manured since the Ray Gun era. This misinformed argument is being viciously played out as we speak, discussing investments.
Actually, Will is a syndicated columnist; IBD merely purchased rights to reprint this column from the Washington Post Writers Group. You can find the original at the Washington Post here. Or if you want to read it at the syndication arm of the Post, that's over here (look for link at Recent Articles).
While Will can offer interesting thoughts, in recent years he seems to have veered into posing straw man arguments. Here, he starts with the strange notion of precise equality of economic results (as opposed to approximations, equality of economic opportunity, fairer valuation of different types of economic contributions, etc.)
Curiously though, he seems to set down this straw man by supporting the thesis that "everyone [should] have enough".
Gosh, that sounds like a distant echo. Where have I heard that before? Oh, yes. "To each according to his needs". Thank you comrade
ACA is a huge start, low or free higher-ed tuition, more spending on public ed, wider community college access and institutions, enormous increases in preschool and early-childhood experiences,
EIC expansions, guaranteed incomes the way so many other countries do it, much higher high-wealth taxation,Increases in SS and related benefits payments.
vast infrastructure spending, and much more along all of those lines.
I deleted the words that does not answer the question. your answer boils down to::
Health ins
Education
Increase Gov't entitlement program's,
Infrastructure spending
You omit how any of that will increase the size of the middle class.
You do not identify the causes of the shrinking middle class. Without that you can not find a cure.
Well, if you really do not understand how it will do so (income increase, spending, savings), then there is no further discussion to be had, which I guess is a form of no answer, and you can continue to find that UCG's Eric Snow offers something wiser and more ineluctable than those Georgetown papers. Is your cure spiritual revival or something?
@msf, Yeah, Will went stupid some time ago, pretty strange. Many progressives including myself used to find him worth reading, but he no longer thinks hard about anything, so far as I can tell.
Well, if you really do not understand how it will do so (income increase, spending, savings), then there is no further discussion to be had, which I guess is a form of no answer, and you can continue to find that UCG's Eric Snow offers something wiser and more ineluctable than those Georgetown papers. Is your cure spiritual revival or something?
The old "If, you don't understand ..., I can't explain it to you." reply. (I haven't heard that one since 8 grade!) What that really means is your just threw some stuff out there because you don't want to admit you can't answer the question.
David, I understand you want to discuss these economic issues and participate in the threads. However, your posts point out that your knowledge base, reasoning and analytical abilities are not up to the task.
Comments
We've had a bi-partisan consensus among the ruling class on expanding "trade". Trade has grown the pie (GDP), but all the growth has flowed to the owners of capital. Intuitively how could it be any other way: breaking down trade barriers means jobs are offshored to China, the Philippines, and Costa Rica. Labor, social, environmental costs are driven down. Then the goods/services are imported back here and we are still charged 1st world prices. Capitalist margins expanded. Real middle-class wages shrank.
A better trade policy for the working class would be to require capital investment (factories, jobs) as a condition of access to our market. Rather than transporting goods from China, transplant offices, plants and jobs. If you (British-, Chinese-, German- capitalist - - or Apple) want access to our market, then INVEST in our market. Or don't -- but don't expect to be permitted access to sell here. More jobs competing for American workers -- this WILL drive wage growth.
There are millions of back-office jobs which 'service' the American economy in India, the Philippines. Citigroup was big on doing this. I'm an American, living in America, doing business with an American bank --- why the devil can't Citi hire Americans for low-level phone service? A lot of the firms I deal with (Dupont, Chemours, Bekaert, etc) have offshored these jobs too. Its disgusting. A pro-jobs tax policy would penalize offshoring.
Similarly, we continue to import workers, legal and illegal, to further drive down wage "pressures" (i.e income). Econ 101: ceteris paribus -- the more you have of a commodity (labor) the lower the price.
Further technology is replacing human labor. This will only accelerate (driverless tractor-trailers coming soon!) The state levies taxes on human labor, but incentives its replacement by machines (accelerated depreciation). Tax policy should encourage employing people, and dis-incent their replacement by machines. If I and my employer have to pay 20-30% as income & payroll taxes, why not tax (for example) the check-out scanner a similar dollar amount, every year? Humans pay higher taxes for contributing to economic output than machines (which pay nothing). We should reverse that. -- Broaden the tax base --- tax business-machines (through their employers), and use those revenues to reduce the tax-rate burden of employing humans.
The above measures will all no doubt be decried by the Chamber of Commerce. But they've "won" the policy debate for the past 35-40 years. The result of their "winning" -- a bigger pie, with all those extra slices going to the top 5%, and diminished prosperity for the typical household.
Lastly, the Chamber of Commerce/Wall Street types always like to throw out the "freeing up Americans for higher-value added jobs, all of which require more education". That is such a massive red herring. News stories are replete with extremely well educated tech workers having their jobs offshored to India, or having to train Hb1 visa types. Its all about costs, not education. Further, there will always be a large segment of society for whom college is simply not a good fit.
There is a reason why Americans' median income has not grown -- the free-traders, and open-border types have won the policy debate, they "won", they got everything they wanted from our 'For-sale' politicians. How has that worked out for the typical American?
It's odd, but I remember the exact moment where the extent of this globalization hit me. I was in the Continental Presidents Club waiting for a flight, and read where IBM was offshoring a number of programming jobs. Offshoring...that was a new term for me at the time. And in the smugness of (relative) youth, I had thought that folks with an education and advanced skills were safe. Not so much. Even our xrays and CT scans are now read in Bangalore.
press
>> There is a reason why Americans' median income has not grown -- the free-traders, and open-border types have won the policy debate, they "won", they got everything they wanted from our 'For-sale' politicians. How has that worked out for the typical American?
If only it were as simple as that.
None of us would have wanted the opposite. Often left out of the equation is that offshoring has resulted in whopping economic advantages for all US families, arguably especially for middle-income-and-lower US families.
A real pity the below discussions are all restricted; they are highly enlightening and propose some policy solutions as well:
https://repository.library.georgetown.edu/handle/10822/710992
Changes in US education is one of them.
Some of the papers here *are* available, it appears, for deeper understanding of the issues (may be in the weeds to some extent):
https://ideas.repec.org/f/pmo617.html
The USA won WWII but lost the peace. Germany and Japan build modern factories and had low employee costs and legacy costs VS the USA in the 60/70s. Then came the rise of South Korea and China to take even more high/med/low paying mfg jobs.
All these trade deals are a reaction to the above and are a desperate attempt to get/keep any jobs the USA could but ultimately they work against the US worker.
Edmond is correct - automation, artificial intelligence, the large population growth, and increased taxes will be the final nails in the coffin for the middle class.
Maybe Paul Krugman is correct though - the US Gov't isn't spending enough and should incur more debt to stop all this. (not)
Anyway, this is a seriously weak, low-information way of understanding how the economic world works. Imagine a US economy where chiefly for our own market and use we produced oil, cheese, meds, TVs, and cars, whether in union shops or not, and as a result they cost 3x what they cost, if not more. How would that work for consumers?
And infrastructure repair (ooh, more debt) is hard to outsource.
Why stop at your baseless 3x cost; why not may it 10x and really solidify your position. No one would be able to dispute you then! (Why the hate for union workers? You should be happy to know that union participation has fallen to a 70 year low of 11.9% & more then half of those are gov't workers.)
So, in your economic world the worker with stagnating pay and decreasing/eliminated benefits (e.g. defined pensions, employer paid health ins.) should be grateful that for cheap imported goods to numb them from the misery of their lives.
Sure, we benefit from cheap imported goods, but one thing left out of that "benefit" is the tremendous waste it entails. People used to keep products for years or have them repaired if they broke. Now we live in a throwaway disposable culture with a lot of cheap often shoddily-made imported goods. What are the consequences to our environment of such a culture? How much landfill does it create and how much pollution in the manufacturing processes of disposable goods and in the shipping of goods thousands of miles instead of locally? And how much exploitation of not only our own labor force but of those labor forces in emerging countries providing us the cheap imported goods are we willing to tolerate?
People say that the sweatshops and child labor that exists overseas are just part of the normal life-cycle of capitalism as countries like China and India build their own middle class. But are they really benefiting from America's decline? Or are they too suffering? The pollution in those countries has become unbearable because of the manufacturing boom there. Click here: cnbc.com/2015/08/18/china-air-pollution-far-worse-than-thought-study.html And of course there is the larger question of climate change from that manufacturing and the emerging middle class. Can the world's environment really bear the brunt of more than one country that consumes and produces emissions like the U.S.? These are all tough questions globalization raises with no easy solutions.
Not enough, but now in everyone's mind.
Carbon footprint in shipping (bottles of wine and all similar, e.g.) is also worrisome.
But the capital/labor deltas may be intractable.
Maybe more charts will help you.
http://billmoyers.com/2015/01/26/middle-class/
Meanwhile, the need for that labor to produce the fundamentals of life--food, shelter, etc.--has declined dramatically thanks to technology. In 1820 72% of the American workforce was in farming; today less than 2% is because of advances in agricultural technology. What that means is that we--and I mean this globally--are suffering from excess capacity. And the only way to address that excess capacity is to get people to consume more and more goods that are not essential to life, thereby producing more carbon emissions and exacerbating our climate change problem. That is the only way for all that labor to find work. Otherwise you see an erosion of livelihoods--unemployment spikes and the middle class dies.
I don't think Adam Smith when he conceived of the free market's invisible hand quite envisioned this scenario. The idea that if we just let the market work its "magic" everyone will eventually be happy ignores the problem of excess capacity we now face. Because the market is not an efficient allocator of resources when you're suffering from such excess capacity. Think of it this way: If I search Amazon.com right now, I can find 2,452 different kinds of plastic poop: https://amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=gag+poop Yet there are still many people who don't have enough to eat. That is symptomatic of excess capacity. The market will efficiently allocate resources only to those who have financial capital, efficiently pricing plastic poop and creating many different varieties for consumers with the money to buy it. But it is not an efficient allocator of resources for those without capital, namely the unemployed and thanks to technology, unemployable. They can't get enough to eat. Is producing so much poop--not to abuse the pun--wasteful of resources when some people are starving? I think it is. Is it wasteful when we have a major environmental problem on our hands? Yes, again. (The carbon "emissions" from making the plastic are bad for the environment as oil is plastic's feed stock.) But this capacity problem can't be addressed without admitting that the free market is not a panacea for all of the world's ills.
Essential to life or not: if more and more labor becomes "excess" (and I agree that this is a major problem in this equation) then obviously fewer and fewer people will have the disposable income to consume the required "more and more goods".
You folks understand that, as did Henry Ford, but because of the increased globalization of labor I believe that many of the broadly distributed (dare I say "trickle down"?) benefits which have historically been associated with increased global trade are no longer possible.
Lewis has also cited the connections between global manufacturing and increased environmental problems. This whole thing seems to me to be a very complex and interrelated set of issues, with no clear and easy fixes, and little or no guidance available from history. I believe that future historians will see the 21st century as the beginning of a major new historical economic era, with many of the previous rules and concepts becoming increasingly irrelevant to existence for the majority of people on this planet.
Unfortunately the world political and economic leadership seems to think that more of the same will somehow make everything turn out OK. I don't think so. I think that the entire world economy is on the cusp of a major tectonic shift. To what, I have no idea.
http://oll.libertyfund.org/quote/316
See last para for subtle explication.
But have we long entered a state where tech development does not directly benefit the inventor? Sure.
This has been studied to death and with great sophisticated and recognition of no simple answers. It is all extremely complicated and unamenable to simplicity.
@Dex, I share all of your concerns, I think, every single one, strongly, even though I find your reasoning and handwringing not sophisticated or informed. Don't need anymore charts; I have read widely in this area, and the OP had plenty of data. I and my family, backward and forward, are part of the picture. What do you think should be done --- concrete policies? I believe I have asked this before of you.
@OJ, +1. And Ford knew he had to pay enough for his workers to buy the damn cars. This has already been pointed out many times.
Of course. Help us all out: again, what do you propose? Severe protectionism? Can you point me to what I missed? Or is it hopeless and we all simply must share your handwringing? That's weak.
A rock is thrown off the Empire State Building - it is falling - the trend is down. Science and history tells us it will hit the ground. I am agreeing with science and history.
Understand?
Prior to the industrial revolution, there really was no such thing as a large "middle class". There was a fairly small class of merchants and tradespeople who generally were better off than the poorer classes, and of course a class of aristocracy: the "1%" is always with us, no matter where, no matter what. The industrial revolution roughly coincided with the exploitation of America, and in the case of the major European powers, the colonization of much of the rest of the world. It would be quite a stretch to believe that those colonized peoples had anything close to a native middle class.
America was a special and unique situation, well into the twentieth century. An entire continent, natural resources and riches beyond anyone's ability to measure, just lying there ready for exploitation using the immense new power of the industrial revolution's technological resources. Those resources may seem primitive now, but they certainly were anything but then.
The nineteenth and twentieth centuries saw the rise of the world's first real middle class. But those 150 or 200 years are just a blink in the unfolding historical timeline. And now, with the power of the industrial revolution all but negated by the immense power of modern international communications and transport technology, we seem to be entering a new phase of human socioeconomic evolution. It's surely true that the large middle classes of Western society are rapidly diminishing, but it's also quite evident that there has been a simultaneous compensating improvement in the living standards of many Eastern societies.
Anyone who thinks that we can somehow create a gated compound for the entire United States is living in a fantasy. For better or worse, like it or not, we have no choice but to continue to increase our commercial and political interface with the rest of the world. Historically, one of the last-ditch measures used by powerful nations to maintain or increase their commercial or political advantages was of course the military option.
Irrespective of the ethical issues, the present wide availability of extremely powerful military technology has removed even that option as a realistic alternative for the worlds greatest powers. So we have no choice but to try to adapt to the new challenges. How we do that, and how successful we may be, are really major unknowns at this time. There is no historical guide, and unfortunately there is not even a real understanding by the "1%" that we need to do anything at all. After all, they don't have problems, and they certainly are not responsible for the rest of the world's issues. If the rest of the world would only work as hard as they do, everything would be just peachy.
The middle classes know that something needs to change- and they instinctively resort (of course) to the men on white horses such as Trump, Cruz, and their ilk. Good luck to all of us.
There is a historical guide:
http://www.ucg.org/the-good-news/the-life-cycles-of-empires-lessons-for-america-today
http://www.goodreads.com/book/show/6177860-the-fate-of-empires-and-search-for-survival
>> what would you do to change the trend of the shrinking middle class?
Well, there are any number of policy changes that smart analysts and political thinkers, including some academics you relentlessly scorn, have advocated, in great detail and practicality.
This is not at all an unstudied area, in other words, not even close.
ACA is a huge start, low or free higher-ed tuition, more spending on public ed, wider community college access and institutions, enormous increases in preschool and early-childhood experiences, EIC expansions, guaranteed incomes the way so many other countries do it, much higher high-wealth taxation, vast infrastructure spending, and much more along all of those lines. Increases in SS and related benefits payments.
It is not mysterious, rocket science, inevitably prone to failure, crazily costly, or any of those things. It would take really persistent effort and argument. Completely doable. Likely? Not bloody.
In these matters I give zero actionable cred to Glubb, UCG and the bible, and all such faith- or scripture-based historical analogizing. I am however always stirred by Pasha's concerns about excessive wealth and power accumulation and the need for applied social love, not that those were original thoughts with him. The policy changes I refer to above would be a direct implementation of much of what Glubb prescribes. Again, this has been known for the longest time and regularly denounced as socialism and coddling and in direct opposition to the American bootstrap crap nonsense and myths so heavily manured since the Ray Gun era. This misinformed argument is being viciously played out as we speak, discussing investments.
This too may interest you, just posted:
http://www.nytimes.com/2015/10/17/opinion/what-happened-to-working-women.html
https://mises.org/blog/poor-us-are-richer-middle-class-much-europe
and this one's for @davidrmoran...since I know how much he loves IBD:
http://news.investors.com/ibd-editorials-on-the-right/101615-776046-george-will-asks-if-economic-equality-a-moral-imperative.htm?p=2
While Will can offer interesting thoughts, in recent years he seems to have veered into posing straw man arguments. Here, he starts with the strange notion of precise equality of economic results (as opposed to approximations, equality of economic opportunity, fairer valuation of different types of economic contributions, etc.)
Curiously though, he seems to set down this straw man by supporting the thesis that "everyone [should] have enough".
Gosh, that sounds like a distant echo. Where have I heard that before? Oh, yes. "To each according to his needs". Thank you comrade
Health ins
Education
Increase Gov't entitlement program's,
Infrastructure spending
You omit how any of that will increase the size of the middle class.
You do not identify the causes of the shrinking middle class. Without that you can not find a cure.
In short, you do not have an answer.
@msf,
Yeah, Will went stupid some time ago, pretty strange. Many progressives including myself used to find him worth reading, but he no longer thinks hard about anything, so far as I can tell.
David, I understand you want to discuss these economic issues and participate in the threads. However, your posts point out that your knowledge base, reasoning and analytical abilities are not up to the task.
I enjoy political jousting as much as the next guy, but lighten up please.
press