The Washington Post’s Ezra Klein is surely correct in writing that Wednesday President Obama gave “perhaps the best single economic speech of his presidency.” The president said, “I believe this is the defining challenge of our time: Making sure our economy works for every working American.”
But changing the trajectory of policy and change that has caused the worst inequality since the Gilded Age is a different matter.
Technology has played a role, at the very least in widening the rewards the market gives different actors, in making it even harder on people with only a high-school education or less. Many anti-immigration critics say this is a big problem, and there is some truth to this inasmuch as immigration has been at very high levels over the past 20 years.
But policy is responsible for most of the problem.
Policy made it easier to bust unions and more difficult for workers to unionize. Court decisions have tilted the balance away from worker rights and protections.
Policy created unbalanced trade deals that sent millions of well-paid manufacturing jobs overseas, as well as encouraging American corporations to set up operations abroad.
The growth of the financial sector, enabled by deregulation, encouraged investments in vehicles such as derivatives that do little to create new jobs or productive enterprises. Meanwhile, salaries have soared on Wall Street, often dependent on doing deals that kill jobs and local companies.
A look-the-other way attitude by leaders of both parties on antitrust caused decades of anti-competitive mergers and industry consolidation.
Weak corporate governance and ever-lower taxes on the wealthy encourage excessive compensation for top executives, even as workers are required to give back gains or start with lower salaries than a generation ago.
The United States is spending less on infrastructure and education, both of which substantially hurt opportunity for those not already in the top 5 percent.
Inequality is a complex question. But the status quo has powerful backers among the American elites that most profit from inequality. So, yes, it is the defining challenge — not merely to the economy, but to our democracy. It will take many more speeches, and more than speeches, to rebuild the middle class and replace the rungs in the ladder up that have been ripped away.
The result is the loss of what Seattle venture capitalist Nick Hanauer calls “the virtuous cycle” of increasing prosperity for all.
Until we fix this, don’t be surprised at such responses as fast-food worker “strikes.” Even Americans that disagree with these tactics are afraid of the future, for themselves and their children. Even companies that pioneered the race to the bottom will reap the damage from Americans that can’t afford their products.
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Today’s Econ Haiku:
It’s the Show-Me State
Until Boeing dangles jobs
It’s the Give Them State