Jeff Faux, a progressive economist who founded the Economic Policy Institute in 1986, is the author of the new book, The Servant Economy: Where America's Elite Is Sending the Middle Class. "The mantra, as you know, in today's political debate is jobs, jobs, jobs," he told an audience at EPI recently. "Listen carefully because the subtext is low wages, low wages, low wages."Welcome to your new economy. And neither Party is doing anything about it:
Faux argues that by the mid-2020s, even with the most optimistic assumptions about economic growth, current trends indicate that the average American's wages will drop about 20 percent. One big factor is that more and more good jobs will go overseas, leaving even America's best and brightest no alternative but to enter the service industry.
"You go into an Apple store and you see the future," Faux said. "The future's not in the technology -- the future of the labor force is all in those smart college-educated people with the T-shirts whose job is to be a retail clerk for Chinese goods."
One impetus for job growth, Faux writes in his book, is that as the super-rich get even richer, they'll need more and more servants.
But no matter who wins the election, Faux said, the governing elite has pretty much already ruled out that agenda, in favor of light regulation and governmental austerity.That's because both Parties have been utterly captured by the ideology of Assets and Wages:
American public policy on both sides of the aisle reoriented itself away from a focus on wages and toward a focus on assets. Specifically, the idea was that wage growth was dangerous because it led to core inflation in a way that asset growth did not. American foreign policy became obsessed even more than it had been with maintaining access to oil, both to prevent future oil shocks and to prevent inflationary oil spirals. Wage growth was also dangerous because it would drive increasing numbers of American corporations to employ cheaper overseas labor.This is not a uniquely American or even Anglosphere problem. This ideological uniformity is occurring to a greater or lesser degree across the entire developed world. The Left is in a universal quandary over what to do about it, insofar as the established Left recognizes it at all.
But that left the question of how to sustain a middle class and functional economy while slashing wages. The answer was to make more Americans "true Capitalists" in Reagan's terms. Pensions were converted to 401K plans, thus investing about half of Americans into the stock market and creating a national obsession with the health of market indices. Regular Americans were given credit cards, allowing them to take on the sorts of debt that had previously only been available to businesses. Most crucially, American policymakers did everything possible to incentivize homeownership, from programs designed to help people afford homes to major tax breaks for homeownership and much besides.
Low prices on foreign-made goods were also a policy priority. This had a dual benefit for policymakers: lower prices offset stagnant wages, while keeping core inflation low. Free trade deals were also a major centerpiece of public policy in this context. Few politicians actually believed that these deals would help increase wages and jobs in America. But what they were designed to do is keep low-cost goods coming into America, while increasing the stock value of American companies exporting goods overseas, thus raising asset values.
Low interest rates were also important. Renters and savers suffer in a low-interest rate environment, but borrowers and asset owners do very well. Tax cuts, of course, are also helpful in offsetting the impact of wage stagnation.
In America, the Democratic Party is a force for good in many ways, especially in ensuring equal access to our very imperfect meritocracy regardless of race, gender, sexual orientation, etc. But by and large, the Democratic Party is quite blind to this problem. It's difficult for people trapped in a system whose problems they don't fully understand to even begin to offer solutions to those problems. It is human nature to cling to a broken system for fear of alternatives until it's far too late, unable to even visualize alternatives or realize what is even wrong with the current system. So everyone rows right over the waterfall together, taking even the visionaries along with them like so many doomed Cassandras.
Among those who see the problems and see the end coming, there are many who look forward to the collapse, envisioning utopias that will never come to fruition and severely underestimating the darkness, prejudice, ignorance and injustice that inevitably arrive when large social systems fall into disrepair. Anarchists always believe that collapse must be superior to the current social order--until the social order disappears. When societies collapse, the creative destruction is far more destructive than it is creative.
If we wisely choose not to embrace the collapse, we have to look at how to change the system as is. As long as America has a winner-take-all voting system, there will be two dominant political parties. As long as there are two dominant political parties, the only real path to change is to exert influence on one of those two parties.
Those of us with the vision to see the problem have to act to exert our influence against the mindset that got us here. It's the only way out for those of us who refuse to embrace the darkness of reactionary plutocracy and pseudo-progressive nihilism.
Cross-posted from Digby's Hullabaloo