There is the kernel of an idea in the latest editorial in the Washington Post but, unfortunately, the editors fail to root through the chaff provided by their own preconceived notions to find it:
Restoring opportunity requires growth, but new information suggests achieving it will be more challenging after the pandemic, too. The Congressional Budget Office’s latest long-term economic forecast, released Sept. 21, posits annual average output growth of just 1.6 percent a year over the next three decades. For comparison, average growth in the first decade of this century, which included the Great Recession, was 1.9 percent annually. The CBO attributes this to projected slower growth in two key variables, the size of the working-age population and output per worker. The pandemic is expected to deliver a double demographic shock as both the birth and immigration rates fall, and it will take years to return to previous trends, if at all.
The silver lining is that there is no necessary contradiction between policies to spur growth and policies to share the fruits more equitably. Education and training, for example, enable individuals to earn more, even as they promote overall productivity. Resources to invest in them can come from higher taxes on top earners. As travel restrictions end — along with the Trump administration and its crude anti-immigration mind-set, we hope — the United States should increase immigration and reorient more of it toward fulfilling unmet labor-force needs.
Like American democracy, American capitalism has, on balance, been a force for human progress in the past. But, like our political system, the economy needs reform and modernization to thrive in the future.
I agree with the premises: our economy needs reform and modernization. I disagree with the few suggestions the editors provide (education and immigration). Let’s consider a few things.
Education and training could improve productivity but, unfortunately, governments are chronically incapable of providing that. Look at the history of job training programs in the U. S. The reason is simple: they are inevitably strongly predisposed to look backwards, preparing people for jobs that do not or will not exist. Additional subsidies of our educational system have the same problem. Just to provide one example every year America’s colleges and universities graduate more journalism majors than there are people working in journalism. Rather obviously, that is vanity training not job training. If you want to train people for the jobs of the future, you will need to rely more strongly on companies to provide it but companies no longer provide education or training as they once did. Early in my career my employers would pay the full freight for my going back to school part-time. Why did that stop? The answer is outsourcing. Today companies hire to suit. They send out to an Accenture, Tata, Infosys, or Wipro which will provide them a stack of resumes of people with exactly the education and training they require. That they are unable to evaluate or validate the resumes is rarely considered or that there are cultural issues underpinning productivity as well as credentials.
Consolidation is another problem. Companies have cultures which is to say they have self-imposed blinders. Today’s major companies are bigger than ever before and there are fewer of them. Being acquired by a major company is frequently the business plan for start-ups and there are fewer start-ups today than in the past.
Our economy has become far too reliant on minimum age, low wage, or sub-minimum wage employees. That is a consequence of our immigration system. Massive illegal immigration has resulted in a huge supply of such workers. So has sponsorship and our family reunification policies.
Resilience and redundancy are two of the reforms our economy needs but no company will ever invest in such things. Too much effect on the bottom line. There are two ways we could produce resilience and redundancy: a lot more companies competing with each other or specific government regulations requiring such things.
The ideological battle between anarcho-capitalist and progressives results in our economy being less dynamic, have lower productivity and lower wages, be less resilient, and less redundant than might otherwise be the case. Anarcho-capitalists imagine that individuals and businesses will produce those themselves if merely given the freedom to do so. Progressives imagine that politicians and governments are much more competent and honest than they actually are. They’re both wrong.
Sometime in the 1970’s, wage compensation uncoupled from productivity. Since 1980, total productivity has increased by 253%, but compensation has only increased by 116%. Essentially all the productivity growth has been retained by the corporations and the Ruling Class:
https://www.epi.org/productivity-pay-gap/
Prior to the 70’s, compensation closely followed productivity. So, something fundamental happened in the 70’s. I suggest it is the collapse of manufacturing and worker unions. Without factories, high wage jobs are impossible. Without unions, workers cannot force corporations to share the benefits of productivity growth.
By the way, the graph shown in the report is for total wage compensation for everyone, both middle and working class people. Other data shows that real incomes for the working class have actually declined by about 20% over the last 40 years or so, and middle class wages have stagnated. The Ruling Class has captured all of the productivity and economic growth of the last 40 years. All of it.
The late 60’s were probably the Golden Age of the working class. The loss of our manufacturing economy (sold off for profit by Goldman Sachs and other Wall Street denizens) put the kibosh on the working class and workers’ unions. There is no hope for improving their condition until the factories come back to the US (not Mexico, not Canada, not Vietnam, not India…), and the unions are reborn.
All the talk about modernization of the US economy is nonsense and a diversion from economic reality. The lies also serve the personal economic interests of the Ruling Class. The middle class is next in line for immiseration, and it doesn’t matter which party is in power or what their ostensible policies are. We’re going down.
Multi-factorial. A combination of immigration, globalization, financialization of the economy, and distortions caused by government subsidies and the tax system.
I didn’t work this into the post but the “de-coupling” you referred to was aggravated by a decline in business investment in productive capacity. I have documented that in the past. A lot of business investment nowadays, possibly as much as 75%, is financial rather than in productive capacity.
Our economy has become far too reliant on minimum age, low wage, or sub-minimum wage employees. That is a consequence of our immigration system. Massive illegal immigration has resulted in a huge supply of such workers.
IMO this has always been the case in this country, excluding the aberration from post WWII up to about 1980.
It is in fact the normal condition of most human societies. Wealthy ones that is.
Most of the stuff you list are problems within th eUS business structure, yet you lay this all at the feet of government. Immigrants wont come here if they cant find jobs. Who is giving them those. Who outsources to the rest of the world. And no, that is not all the fault of governement, it is mostly just money driven, though mostly for the executives and investor class. Even the financailizatio is mostly a choice made by businesses.
Steve
‘So, something fundamental happened in the 70’s. I suggest it is the collapse of manufacturing and worker unions.’
It was the other way around. Corruption, featherbedding, and exorbitant demands by unions helped to offshore manufacturing resulting in decline of ‘production industry’ unions. As Dave pointed out, ‘reforms’ to immigration policy (starting in 1965, a key date), encouragement of illegal immigration, subsidies and financialization (encouraged by government action, thanks to the law-writing by lobbyists and bill-passing by complaisant politicians) also played big roles.
The golden age of US production unions was an aberration caused by the destruction of most of the free world’s manufacturing during World War II. Once that had been rebuilt (much of it courtesy of the US taxpayer) the decline of US manufacturing was likely inevitable, exacerbated by the national defense subsidy the US provided to Western Europe, Japan, and South Korea, again thanks to your wallet and mine.
I think a modern immigration system would look like Canada’s or Australia’s and be strictly enforced as theirs are. It’s quite difficult for illegal migrants to work there. Steve’s right. It’s the incentives and the only institution in a position to deal with the situation is the government.
We need to rebuild and add redundancy to the electrical generation and transmission grid. This would be an enormous undertaking if not for it being bound up with climate policy, which makes it utterly impossible.
Maybe we should do a national poll to see what climate Americans prefer before we adjust it too much.