The political divisions that started erupting across America in 2015 are about many things. These include the meaning of national sovereignty, the sense of a growing chasm between the political class and everyone else, and angst about what many believe to be unwarranted accelerations in wealth and income inequalities. Underlying such worries, however, is another belief: that opportunities for advancing one’s social and economic well-being are narrowing, even disappearing for many Americans. And if—if—that is the case, then part of the promise which America has long offered the world is in danger of extinction.
Variants of this narrative circulate on the American left and right. It is often called “populist,” which I take to mean a rhetoric about and/or concern for those who are not mega-wealthy, who are not close to Washington D.C. policymakers, who do not live in new economy technology-hubs, who have lower-levels of educational attainment, or who believe themselves to be working harder for less.
Populist accounts of what’s wrong with America go hand-in-hand with the conviction that government must act to mitigate these problems. The proposals for action vary from the types of industrial policy advocated by some conservatives and liberals, to the radical shift toward social democratic arrangements that many on the American left insist is the decent thing to do. If the American Dream of advancement through hard work and imparting higher living-standards to your children is to be saved, the argument goes, we need more state intervention.
All this assumes that many Americans simply aren’t getting ahead as they used to. But what if that presumption is incorrect? What if such claims simply don’t accord with important realities about America’s economy?
These are the questions addressed by the economist Michael R. Strain in a new book, The American Dream is Not Dead (But Populism Could Kill It) (2020). Strain’s thesis is that, despite many real problems, the U.S. economy is performing in ways that underscore a yawning gap between reality and the pessimistic claims emanating from sections of the left and right. Short responses to Strain’s argument are penned by the columnist E.J. Dionne and the commentator and election analyst Henry Olsen, followed by a rejoinder from Strain.
The Good News: America’s Economy is Delivering
Neither Strain nor his respondents pull their punches. But what is refreshing about their analyses is that they are relatively nuanced. Strain doesn’t deny that there are major social and economic problems in the United States. He acknowledges, for example, that the suicide crisis is real. Some towns, Strain adds, have been left behind by automation. So too have males who did not finish high school. Their wages, he states, have stagnated.
But Strain also points out that “most towns are not manufacturing towns” and wage stagnation is “not typical for American workers.” Instead the American economy is working for the vast majority of Americans. Strain grounds this claim squarely on the basis of careful analysis of relevant data-sets provided by the Bureau of Labor Statistics, the Bureau of Economic Analysis, and the Congressional Budget Office. These, he argues, indicate that 1) wages and incomes for typical workers have not been stagnant for 30 years; 2) typical American households have experienced broad quality of life improvements for decades; and 3) Americans still generally experience upward economic mobility.
It’s not that Strain paints a blemish-free picture. He is not Pollyannaish. Middle-income jobs, he affirms, have been “hollowed out.” This is the result of technology replacing jobs that are repetitive and require precision and accuracy: i.e., functions that computers and robots do well. Interestingly, some of the occupations which are not disappearing are 1) “many of the lowest-skilled, least-paying” jobs that require regular interactions with people and a certain degree of adaptability; and 2) high-skill occupations in which people have to exercise judgment, adjust to change, debate, and be creative.
All these jobs involve tasks which computers cannot do well. This is one reason why, Strain maintains, “a new middle of the labor market” is emerging in occupations like education, healthcare support, personal care, etc.—jobs that require more education than, say, clerical work or being a factory line-worker, but also the type of situational flexibility and social intelligence which technology can’t replicate.
Everything’s Not Alright
The responses from Dionne and Olsen to Strain’s analysis reflect many of the messages of those on the left and right who doubt that America is fulfilling its promise. For Dionne, the left is not pushing populism but rather expressing justified concerns about what Dionne believes to be indefensible inequalities as well as social mobility rates lower than social democratic European countries. Unfairness is the real threat to the American Dream, according to Dionne. The solution, he states, is for America to embrace something similar to the New Deal economic consensus which existed until the Reagan presidency.
Looking at the data, Dionne suggests that Strain’s focus on the years from 1990 onwards distorts the picture of what has happened in America. It excludes, for example, what Dionne regards as the Reagan presidency’s economically regressive effects. Strain’s response is that looking back further than 1990 doesn’t invalidate his conclusion that, for instance, wage and income growth hasn’t stagnated for decades.
Olsen’s position is quite different. He believes that there is much which Strain gets right, especially his critique of the left’s claims about America’s economy. Olsen also thinks that Strain provides good evidence that many Americans are getting ahead. Yet, he argues, there is much data which contradicts Strain’s claims. Some of it supports the “conservative populists’ narrative regarding declining opportunities for men with lower educational attainment.” This correlates, Olsen says, with periods of deindustrialization. To counter this claim, Strain doesn’t deny that “a 45-year-old man laid off from a factory faces a serious challenge.” He nevertheless insists that the evidence indicates that, with hard work, these men can successfully get back into the economic game.
Much of the debate between Olsen, Dionne and Strain will strike many readers as duels about data. But an important point raised by Olsen in the ensuing discussion is that populism’s rise shouldn’t be dismissed primarily as the result of politicians stoking outrage. In Olsen’s view, Strain’s portrayal of conservative populists doesn’t match with what those on the right calling for more intervention actually say. Conservative populists, he insists, simply believe that new times call for new measures, and to label them as, for instance, anti-immigrant per se or spendthrifts, let alone as bigots, is unjust and inaccurate.
That’s a fair point. There’s nothing bigoted about believing that the United States is perfectly entitled to decide who does and doesn’t enter the country. That is part and parcel of what it means to be a sovereign nation. By the same token, I’d suggest that those who criticize calls for more intervention shouldn’t be labelled “free-market fundamentalists”—a phrase employed by Olsen. This expression has constantly been attached in an almost mantra-like fashion to those who think that good economics—and, more importantly, history’s lessons—indicate that when governments move beyond carrying out certain core and indispensable functions (save in genuine emergencies), their economic interventions more-often-than-not go awry.
To say such things is not to be a market fundamentalist. It is merely to note that there are good reasons to be skeptical about the state’s ability to secure better long-term economic results than markets within a context of strong rule of law, defined property rights, and a moral culture that underscores the more-than-empirical value of such things. Polemics in the economic nationalism versus free market debate, whatever their source, is of no service to the truth.
On balance, I’d argue that Strain’s empirical claims stand up against Olsen and Dionne’s criticisms, not least because he provides good answers to their questions. There are, however, two wider points which need more attention in this discussion.
The first is that there are some specifically political phenomena which have driven populism’s emergence in America which the economic debate doesn’t quite capture and itself can’t resolve. One example is the crony capitalism problem. Many Americans are angry about the close relationships between businesses and politicians of both major political parties that displace free markets in favor of political markets. There is something fundamentally unjust about arrangements that explain why, as Luigi Zingales observed in 2012, “seven of the ten richest counties in the United States now are in the suburbs of Washington D.C.”
To the extent that populist leaders are perceived (and I stress “perceived”) to be outsiders to this process of mutual enrichment, it’s hardly surprising that evidence of widespread cronyism fuels the emergence of such figures. Populist policies will, as Strain stresses, significantly undermine the market’s ability to deliver on the promise of the American Dream. But it is failure to deal with political problems like cronyism that create opportunities for people pushing measures like industrial policy which only accentuate crony behavior.
The second broader point concerns the limits of the influence that even the best analyses of data can exert upon politics. While such contributions are essential, they are not sufficient.
In my experience, most of those who regard markets as preferable to either social democracy or widespread industrial policies have enormous difficulty moving beyond considerations of utility, numbers, and graphs when presenting their arguments. It is almost as if they are afraid of entering into robust normative discussions, whether it’s about the nature of the common good or the ends of human freedom. In many cases, they effectively cede that territory to those on the opposite side of these economic debates, perhaps figuring that appeals to facts are enough.
Nor is it enough for free marketers to say that “everything is getting better.” That may be empirically true in terms of material well-being and other measures of economic development; but the dynamism and churn that, as Strain notes, is central to the working of markets means that not everything is constantly improving for everyone all the time.
Put another way, advancing the case for free markets over and against economic nationalism requires the integration of robust normative arguments with empirical evidence, all of which must be wrapped into a rhetoric geared to the needs and expectations of the time. In the present context, this means we need people who can show why free markets and free trade are generally good for America, and who don’t make the mistake of dressing up the case for such things in Davos-like terminology. If you want to persuade Americans about the economic and political case for economic liberty, the message of “universal-peace-and-love-through-free-trade” (about which Adam Smith himself was rather skeptical) which often prevails in free market circles is precisely the wrong language to use.
From this standpoint, Strain’s explanation of how markets are generally delivering on the promise of the American Dream is a step in the right direction. But if more expansive arguments of this nature are not made and further supplemented with deep normative content, I have no doubt that market liberals will lose their case in the court of public opinion, whatever the facts.
This article first appeared on April 29, 2020, in Law & Liberty, a project of Liberty Fund, Inc., and was republished with permission.
(Photo credit: Public Domain Pictures)