Mitt Romney's thumping victory in the Florida primary this week is bringing us closer to a Romney-Obama face-off in the autumn. While we do not know for sure if Romney will clinch the Republican nomination, if he does, we can already say what the central question in November will be: Is the United States one nation under God, or has it become a country where the government needs to secure a better deal for the 99 percent?
We know Romney's view. In a television interview last month, he explained: "When you have a president encouraging the idea of dividing America based on the 99 percent versus 1 percent "” and those people who have been most successful will be in the 1 percent "” you have opened up a whole new wave of approach in this country which is entirely inconsistent with the concept of one nation under God."
Meanwhile, in his State of the Union address, the president opted explicitly for the 99 percent perspective. Restoring their fortunes is "the defining issue of our time," he said. "No challenge is more urgent. No debate more important. We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules."
The Obama analysis gets a lift from "The China Syndrome," a recent paper on the impact of trade with China by a powerful troika of economists: David H. Autor, David Dorn and Gordon H. Hanson. The empirical study, which was cited in an important speech on inequality a few weeks ago by Alan Krueger, chairman of the president's Council of Economic Advisers, is particularly significant because it marks a shift in consensus thinking in the academy.
In the debate about the causes of growing income inequality, U.S. economists have tended to opt for technology as the driving force. Indeed, in his remarks, Krueger referred to a survey he did of those economists, who overwhelmingly cited technological change as the most important factor.
But drawing on detailed data from local labor markets in the United States, the authors of the "The China Syndrome" argue that globalization, and in particular trade with China, is having a huge impact on blue-collar U.S. workers: "Conservatively, it explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment."
The deleterious effects go beyond those workers who lose their jobs. In communities hit by the China Syndrome, wages fall "” particularly, it turns out, outside the manufacturing sector "” and some people stop looking for work. The result is "a steep drop in the average earnings of households." Uncle Sam gets hit, too, especially in the form of increased disability payouts.
Autor, Dorn and Hanson are no protectionists. But in a challenge to the "one nation under God" view of the world, they offer a sharp reminder that the costs and benefits of trade are unevenly shared. As they put it, their finding does not "contradict the logic" of arguments favoring free trade: "It just highlights trade's distributional consequences."
When I raised the issue with Joseph E. Stiglitz, the Nobel economics laureate and longtime doomsayer about the downside of globalization, he practically crowed with vindication. "The economic theory is very clear," he said. "What happens when you bring together countries which are very different, like the United States and China, is that the wages in the high-wage country get depressed down. This was predictable. Full globalization would in fact mean the wages in the United States would be the same as the wages in China. That's what you mean by a perfect market. We don't like that."
The truth is we are no longer living in "one nation under God"; we are living in one world under God. Globalization is working "” the world overall is getting richer. But a lot of the costs of that transition are being borne by specific groups of workers in the developed West.
We are accustomed to thinking of the left as having an internationalist perspective. Liberals are the sort of people who worry about poverty in Africa or the education of girls in India. The irony today is that the real internationalists are no longer the bleeding-heart liberals, they are the cutthroat titans of capital.
Here, for instance, is what Steve Miller, the chairman of insurance giant American International Group and one of Detroit's legendary turnaround bosses, had to say about globalization and jobs. "Well, first off, as a citizen of the world, I think everyone around the world, no matter what country they're in, should have the opportunities that we have gotten used to in the United States. Globalization is here. It's a fact of life; it's not going away. And it does mean that for different levels of skill, there's going to be something of a leveling out of pay scales that go with it, particularly for jobs that are mobile, if the products can be moved, which is not everything."
No matter what passport you hold, if you run or own a global company, that is not really a big deal. But as Autor, Dorn and Hanson show, if you are a U.S. worker, that "leveling out" can be painful indeed.
Smart policy, however, can make a big difference. Europe may not seem to have much to teach the rest of the world at the moment, but as Chancellor Angela Merkel leads a group of German industrialists to Guangzhou this week, Americans might want to study how Germany has turned the China Syndrome to the benefit of both its chief executives and its blue-collar workers.
There is more wisdom in this article than misinformation. I’m impressed! It is refreshingly ambitious in scope that it seems more fair to try to supplement information that seems misleading than “point the finger”.
I personally loathe the OWS terminology without regard to who uses it or why. If you ask ten different people to describe who is in the 1% and who is in the 99% you'll get ten different answers! The "common ground" necessary to initiate or carry forward meaningful discussion is conspicuously absent.
Similar is the "one nation under God" excerpt. I would hope Romney's words sought to invoke the "one nation" bedrock which originates with our founders, our Declaration of Independence and our Constitution; and NOT the "under God" which was inappropriately insinuated into OUR Pledge of Allegiance by religious fanatics to advance their own agenda almost two hundred years later.
Do those last two words add anything whatsoever to the point Romney needed to make? No. They are political pandering to today's religious right whom we can thank for the current Susan G. Koman-Planned Parenthood controversy.
It is discouraging to listen to our "lords of the dismal science" abstractly contemplate the lint in each other's navels before speculating on how to rearrange the deck chairs on the Titanic. The threat of ice ahead is NOT “so many jobs lost here” or “so many jobs gained there”. It is the DIFFERENCE in the quantity and mix of jobs required by the world economy of the past, present and future.
America is struggling to "come to grips" with the absolutely unprecedented number those that have been or will be laid off in the transition. The "dirty little secret" is that a majority of older workers without degrees and/or whose "specialty" is no longer needed will find another job; and lack the financial resources to retire. As the faces of more and more friends and relatives are included, this struggle "feels" more and more "personal".
Companies aren’t stupid. Those hiring are younger. They prefer younger, more tech-savvy people who are numerous and willing to work part time.
It's not “rocket science” to chop complex processes requiring multiple skills into simpler ones easily mastered in two weeks that part time people can and will do without the additional expense of fringe benefits, advancement or retirement. This is the face of efficiency under our present tax system.
Any meaningful "solution" to current personal and geographical economic disruption begins and ends with our tax code.
It is interesting, although very, very bitter, to see, at long last, that many major economists now recognize what many ordinary citizens have been directly experiencing and reporting for about 30 years, i.e. the giant drain of capital, technology and jobs from the West to China, as authorized by international agreements designed and signed by ill-advised Western governments, subsequently exploited by cynical and greedy Western capitalists, with no loyalty or patriotism whatsoever with their countries and people.
As to “One nation – or one World – under God”, as quoted in this article, this statement is meaningless as long as one does not specify which “God” is here referred to. At least as far as the US is concerned, the fact is that this “God” has been overwhelmingly “Money and Hypocrisy” for about thirty years, and not at all any religious, ethical or moral principle. The fact of the matter is that this “God” of “Money and Hypocrisy” has been guiding the so-called “elites” of the US and of other major Western countries, especially through the globalization process which they themselves recklessly initiated. In so doing, the US and the West have most likely committed their “suicide”, allowing the fast and unstoppable emergence of China as the dominant power of the new centuries.
There’s obviously some truth to the widespread perception that growing income disparity in the developed world is driven by outsourcing of blue collar jobs to the developing world. But few people realize the important role that the unprecedented global credit expansion since the 1980s has played, and is still playing via public deficits.
It’s important to understand the accounting realities of where profits come from. High profit levels are after all the source of the upper crust’s burgeoning wealth. The Levy Institute has come up with a very helpful profits equation, which defines the sources of aggregate profits on a national level. They are business investments, business dividends, fiscal deficits, trade surpluses, and household net borrowing. Since business investments are largely credit-driven, there is a very strong correlation between credit expansion and domestic business profits.
That doesn’t include the profits earned abroad by US companies, which is where outsourcing does come in. But trade deficits depress domestic profits.
And fiscal deficits inflate domestic profits. Which helps explain why wealth polarization has continued under Obama.
Surprisingly well written and insightful Op-Ed piece Chrystia…. Is that really you ? ?
Chrystia, you see the world with the global lens. How many nations look at the world with blinders on? The gap among rich and poor nations is not going to be decreased no matter how you look at globalization, therefore III WW
It’s disingenuous to blame President Obama for dividing America.
Everyone in my cell phone directory is a lifelong member of the 99%. Most of them are college educated. All of them have more integrity than any CEO on Wall Street.
I can assure Governor Romney and his supporters that everyone I know thinks that the Wall Street “one percenters” should have gone to prison for fraud a long time ago. There seem to be some legal barriers to that and I can assure you that those barriers were not put there by us 99ers. I suspect those barriers to justice were put in place before Obama even became a senator… perhaps right after the Savings & Loan crisis.
Everyone I know is also rather disgruntled when it comes to paying such a high percentage of our hard-earned income in taxes. I don’t mind that Romney has done so well; I even admire his success, but I can assure you that the laws that permit him and other “one percenters” to pay less 15% in taxes and laws that permit Romney to set aside more than 100 million tax-free USD for his children through carried interest is something no one in my cell phone directory would ever have contrived on behalf of the 1%.
The troubling chasm between the 99% and the 1% was put there by the 1%. If they are so deeply offended by that gap, I invite them to close it.
What I can’t figure out is how any of this comes as a surprise to anyone? Both parties have sold out the American middle class. The Clinton/Gore administration was blatantly pro-China and Bush/Cheney pushed through the Trade regs. These people aren’t stupid, they knew the effect it would have. Essentially, our elected officials have stolen our wealth from us and redistributed it to other countries. It’s that simple.
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