Editor’s note: This commentary is by Fred Jagels of Cabot.
Because the media have unlimited access to public spaces and only limited access to private ones, our daily dose of information is heavily skewed to elections, politicians and the minute-by-minute doings of whoever happens to occupy the White House. If we want to know how we ended up with four years of Donald J. Trump in that particular house or why half the country continues to support him, we have to go somewhere else to figure it out. That place — the evolving structure of the American economy — is too often seen as enemy territory for many of us on the left. Let’s go inside and see if we can make some sense of it.
For the past 50 years, the American economy has evolved away from its historic function of production (and sales) to embrace a whole range of post-industrial and post-market activities. These changes have had profound effects on jobs, incomes and investments and especially profound effects on the distribution of the costs and benefits.
Beginning in the 1960s, and especially after 1970, a full quarter of the adult population began to graduate from college. These folks (you and I) began to occupy the millions of post-industrial and post-market jobs that largely supplanted the jobs in production and production support services that had characterized the former economy. It is important to understand that this emerging economy was, and is, an entirely different kind of economy from one based on production and mediated by the market. The post-industrial economy is an office-based economy, no longer neatly divided between the private and public sectors; the market and the state. Health care, finance and government intervention alone, for example, (all nonproductive activities which contribute to but do not generate wealth) comprise well over half of all economic activity. In addition, with the disappearance of real productive investment choices in the late 1970s, residential housing (an end good) has emerged as a kind of alternative stock market, complete with the tendency to run up in price and then crash.
In production, the unskilled and semi-skilled were able to earn a good living when teamed up with productive technology to earn more and then spend less with the lower prices resulting from mass production. It was a win-win situation. In our post-industrial economy, however, for the less educated it is lose-lose. They earn much less (lacking knowledge credentials) and spend much more (on health care, on borrowing, on the indirect costs of government regulation, on housing, education and professional services) all of which directly contribute to the higher standard of living of the credentialed class. Unlike before, every gain for the winners in a post-industrial economy is now a direct cost for the losers. And the transformative engine for all of this has been the substitution of knowledge for productivity in determining compensation. Meanwhile, with extensive automation of domestic production facilities and the off-shoring of lower price production overseas, the production and sales side of today’s economy now concentrates its vast revenues mainly among the managers and shareholders of productive enterprise — the so-called super rich. It no longer has to disburse, as it did in the 1950s, a major portion of these revenues to as much as 50% of the national workforce.
What all this means is that somewhere near half of the working population has been bumped from the middle class to a more tenuous and marginal existence consisting of multiple low paid jobs. It means doubling and tripling up in order to afford a place to live. The regulatory environment often ends up prohibiting or criminalizing informal strategies that marginal households depend upon for survival. Above all, the political party that used to champion the working class has morphed into a kind of neo-gentry whose members live, work, and associate mainly amongst themselves in a bubble of new-found affluence, far removed from the realities of the sub-prime world. Very little of this is the result of intention or political action. Most of it is simply the inevitable result of a mature industrial economy restructured into post-industrial activities.
Enter Donald J. Trump, an opportunist if there ever was one, and the history of the past four years begins to make sense.
So what do we do about this?
Unlike before, today’s “villians” come from both sides of the political spectrum. The new gentry and the super rich are both enjoying gains at the expense of the lower half of the demographic. That means bipartisan solutions are possible. The winners, both left and right, may be less inclined to stand their hallowed ground and more inclined to share resources in favor of the losers.
For another, Growth Policy (with origins in the Employment Act of 1946) is an extremely wasteful means of creating jobs. Demand stimulation (the operant leg of Growth Policy) largely bases those jobs on consumption, setting the stage for much of today’s breakdown. We have 10 times as much retail floor space per capita, for instance, as any other place on earth. In so many other ways, smothered by the fruits of its own creation, Growth Policy is today a weak and bloated vehicle to base an economy on.
There is a cottage industry trying to figure out a successor economic framework that enables a decent, and distributed, standard of living without destroying the earth. It recognizes that more “stuff” only creates more problems, that higher education is a good fit for no more than 35% of the demographic. Manual skills and basic human skills are much more widely distributed. For these, a universal basic income, a government guaranteed job, and a system of portable benefits, among others, are potential remedies. In place of emerging commercial wastelands: affordable housing, solar generation sites and electric transit centers.
If we on the left are allergic to all things economic, and thus blindsided by a phenomenon like Trump, we are also traditionally reform-minded. Once we wake up to the fact that we are a growing part of the problem of inequality in America, a path to a more equitable future may be possible. Any group of people when challenged financially, whether through racial discrimination or economic change, will turn ugly. It is our responsibility to make them welcome again.
