All American political factions are seeking some self-affirmation in the voice of the electorate (at least that of the small voting minority). But the simple fact is that there is one huge issue that looms behind all the political rhetoric, bombast and smokescreen: two-speed economics. The not-so-subtle subtext which has somehow escaped purposeful political dialogue is all about rising inequality.
U.S. economic growth exceeds most forecasts, the stock market has rebounded, interest rates remain low, fiscal and trade deficits have declined dramatically, oil prices have plumbed lower than even the most optimistic forecasts, the unemployment rate approaches what conventionally has been considered “full employment,” yet somehow the needle on the misery index barely moves. The diagnosis is clear, even if the prescription is considerably less so.
Citing a recent National Bureau of Economic Research working paper by Emmanuel Saez and Gabriel Zucman, the Washington Post recently pointed out that 90 percent of American households are poorer today than they were in 1987. In fact, as of 2013, 95% of all income gains made in the U.S. since the Great Recession have accrued to the top 1% of Americans.
Easy money allowed many to cling onto an illusion of prosperity until the bottom fell out of the U.S. housing market in 2007. And since then, it’s become abundantly clearer to everyone that increasingly we’re living in a two-speed world. Some have been able to capitalize on change and do well, some exceedingly well, while most struggle to keep up with the gains of a foregone era of rising tides. This debate has begun to rage on American shores which drew so many “tired, poor, huddled masses yearning to breathe free,” precisely because they sought new beginnings unconstrained by social roadblocks to prosperity. The cohesive rags-to-riches, Horatio Alger mythology, which has driven American can-do optimism since its founding, is now at risk.
To listen to the recent deafening, shrill political “dialogue” one would imagine that the biggest risks we face are from waves of illegal immigrants, or Ebola-infected émigrés, or the excesses of Obama-care, or all manner of social affliction. But these are merely “side-show” issues; the center ring question of growing wealth and income disparity is much more fundamental and requires urgent, all-party agreement in order to move forward.
Post-election bi-partisan leadership or more of the same? (Credit: Chip Somodevilla, Getty News Images)
This is, of course, not a parochial American debate, but a global one. Globalization, propelled by market liberalization and incredible time and space-shrinking advances in technology, has generated extraordinary wealth for what Dani Rodrik has called the “mobile minority” (Has Globalization Gone Too Far?), but has yielded only incrementally, at best, wealth for the “immobile majority.” No doubt, this two-speed world is also characterized by dramatic changes in the jobs market at least as significant as those seen at the dawn of the industrial revolution, when machine power substituted for muscle power. Today’s digital revolution, and the extraordinary knock-on effects into all other areas of life, has only recently begun to manifest itself in the erosion of traditional blue and white collar jobs supplanted by fewer, more highly-compensated gold collar, knowledge-intensive opportunities.
Economists will help us understand the problem, social scientists will remind us of what the consequences may be of not confronting the problem, but only real leadership will be able to address the problem.
Creating income and wealth-enhancing jobs for the immobile majority is key to bridging the growing income gap, and to rekindling the social cohesiveness and trust so crucial to generating a rising tide of sustainable, robust economic growth. One global leader, Pope Francis, is speaking out on these issues: “Growth in justice requires more than economic growth, while presupposing such growth: it requires decisions, programmes, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality.”
Government alone cannot deliver on this urgent agenda, nor can business, nor can either without the support and engagement of the public. Nothing short of a new social compact is required to get us there, and to keep us from slipping into the specter of what this author one decade ago called a world of “Castles and Moats” (World Out of Balance). It has never been clearer that growing inequality is a zero sum game. The rich will not get richer indefinitely without a growing middle class able to buy and enjoy the life-enhancing products and services business can provide. Government will not be able to deliver on its mandate to ensure the well-being of the electorate without an expanding revenue base fed by economic growth. And neither can political or economic elites succeed without the support of a growing, optimistic middle class.