Cross-posted at Education Week.
A while back, I announced that I would be stepping down as the CEO of the National Center on Education and the Economy and, after a six-month sabbatical, returning as Senior Fellow, devoting most of my time to research and writing. The wind down starts now. This is my 373rd blog for Education Week. It is also my last. Sometime around the beginning of July 2019, you will be able to find a new blog from me on the NCEE website, with one to follow at the beginning of each new month. If you want to receive them, get up on our website and sign up for our mailing list. Thanks for your support and your readership through all these years.
I close this run with some reflections on the condition of our country and its politics.
It is clear now that Donald Trump became president by putting together three constituencies. One was the “left behind,” mainly white, and mainly from rural areas and Rust Belt cities, who had been devastated by globalization and who felt that their work, their country, and their dignity had been taken away from them by foreign workers and illegal immigrants and by liberal elites who had no respect for them or their way of life. The second constituency consisted of those business owners who saw an opportunity to benefit economically from a promised roll-back of taxes and deregulation that had been imposed on them by the same liberal elites. And the third constituency was Evangelicals embracing positions on social issues diametrically opposed to those embraced by the liberal elites.
Trump’s genius (or was it Steve Bannon’s?) lay in understanding that, by pooling these grievances and rejecting the norms that were observed by all of his primary opponents, on both sides of the aisle, he could put together a minority of devoted adherents–his “base”–that could carry him to victory. For many of these people, only Trump was telling it like was, only Trump gave them permission to say what they had long been thinking, only Trump could lead them out of the wilderness. Many of the others might have to hold their nose at his behavior but it would, they thought, be worth it.
So, what happens next?
Most economists of both parties agree that the “sugar high” that the Trump tax cuts gave the economy will wear off no later than 2020, leaving the country in recession and facing a mountain of debt. The forces that produced the “left behind” are unabated. Average workers are making little or no more than they made in the 1980s after correcting for inflation–and inflation is on the way up. The giant urban metropolises that are home to the high-tech elites are outstripping the rest of the country in earnings, GDP, and cost of living at an ever-increasing rate. But this is not just an urban-rural divide. New hires right out of university at Facebook are making $140,000 a year while UBER drivers in the same cities are averaging $10 an hour. African-Americans, other people of color, and a surprising number of whites in our inner cities face crime rates, homicides, education failure, and unemployment rates far in excess of those of well-off whites in the same cities. Many people are hurting.
In these circumstances, Democrats are inclined to focus on the glaring income inequalities and the needs of those who are struggling. Where I live, in rural America, that leads to proposals to tax the rich to pay for in-home care for seniors, home heating in the winter, and Medicaid expansion, while Republicans talk about lowering taxes further and holding the line on state spending to keep the budget in balance.
From my vantage point, both of these orientations make a certain kind of sense, just as Trump’s appeal made a certain kind of sense, but neither of them will lead to broadly shared prosperity, and broadly shared prosperity is the only thing that will save our democracy from the authoritarianism that will flow from the politics of despair and grievance.
The jobs that were lost to globalization are not coming back. They are being automated. American manufacturing is actually doing very well, but much of the manufacturing work that was done by people a few years ago is now being done by machines. The same thing is true of mining and steel making. The jobs of gas station attendants were automated years ago. The jobs of retail clerks are ebbing fast. Even the jobs in Amazon’s warehouses are being automated. AI-powered systems are doing legal research, diagnosing cancer, writing music, serving as network newscasters, and doing surgery.
The thing that unites the “left behind,” whether they are rural whites in communities with boarded- up storefronts and peeling paint on their homes or urban African-Americans without jobs or any prospect of getting them, is lack of the kind of education and skills that employers are willing to pay decent wages for. There is a reason that the president “loves the uneducated.” These people are most devoted of his followers. They are the fuel for the flames he is fanning. The difference between the young people that Facebook is hiring at $140,000 per year for their first jobs and the UBER drivers in the same cities for $10 an hour is their education and skill levels.
When it was all over, Amazon said that the winners of their “HQ 2” prize won the competition for the company’s jobs cornucopia not on the basis of tax rebates and gifts of infrastructure (though Amazon did very well in that department) but on the basis of “skills, skills, skills.” Most of the cities that turned themselves inside out never had a chance. The U.S. political divide is not a rural/urban divide. It turns out that the good jobs in the United States, by and large, are in only a handful of cities, and those are the cities in which the most highly educated and skilled Americans live. And, ironically, they have driven up the cost of living so high in those cities that people with less education who used to live quite comfortably in them are now being forced to move out by the rising price of housing. The people at the bottom of the totem pole have often been forced out into low-income, high-crime, near suburbs by the same process.
This process is part of a much larger worldwide dynamic. Prior to globalization, the vast majority of workers competed with other workers in the same neighborhood, city, maybe local region. But now, a large and rapidly growing fraction compete with workers all over the world. Until recently, when globalization mostly affected manufacturing, owners of capital realized that, because transportation was so cheap and communications all over the globe were almost free, they could locate production anywhere, independent of the location of their customers and headquarters. So, they built their manufacturing plants where they could get the kind and quality of labor they needed as inexpensively as possible.
Now, in the second phase of globalization, more and more of the manufacturing is done by robots and is moving back to the countries from which it came. It is also true that globalization is now affecting services much more than in the past. In this case, though, much of the work is done by people who do the work on their computers and send the work product through the internet, collaborating with other team members located all over the globe.
What unites the first phase of globalization with the second phase of globalization is the fact that, whether the work is manufacturing or services, whether it is highly skilled or low-skill work, the employer can look for people with the requisite skills anywhere. Whatever your skill level, you are now in competition with people all over the world who have similar skills and who are willing to work for less.
That is bad news for Americans because we charge a lot for our labor. That is especially true for our low-skill and semi-skilled people–people who have basic literacy, but little more. Many nations that were largely illiterate in the 1970s have now built education systems that are capable of producing levels of basic literacy equal to those in the United States, and those newly literate people are now competing directly with the workers in the United States who have only basic literacy, which is roughly half of our workforce. The cruel fact is that our low- and semi-skilled workers–roughly half of our workforce–are very high priced in the global market for labor. That is why their real wages have not gone up in decades. They are a commodity, and the price they charge at the minimum wage level for that commodity is more than they are worth on the global market.
Neither state nor federal policymakers can change that fact. And it is that fact, not unfair trade practices, that is leading ultimately to the kind of anger and despair that is corroding our politics. I refer here not only to the anger and despair of rural and urban working-class whites, but also to the despair of inner-city African-Americans and many Latinos who are also trapped by the dynamics I have just described.
I’m sorry, Democrats, although something must be done about the truly shocking degree to which a handful of people have captured virtually all the growth in productivity in the new Gilded Age, redistribution will not solve the problems I am describing. The numbers just don’t work. And, I’m sorry, Republicans, but tax cuts for the wealthy have, once again, not produced the promised investment in plant and equipment that was supposed to power the next round of productivity improvement. They’ve been used for stock buybacks that have served only to further enrich the already fabulously wealthy.
The Democrats seem to me to be focused on how to divide a dwindling pie and on expanding benefits while the pie gets smaller. Republicans seem to be focused on discredited approaches to growing the pie, by reducing taxes on large corporations and compromising the regulations that protect our water, our food, and our health.
The challenge is to figure out how to grow the pie in a responsible way, not by giving the economy a temporary “sugar high” it cannot afford and not by waiving regulations we need but by envisioning a high-tech, high-skill future that will provide broadly shared prosperity to the entire population, a kind of prosperity that enables everyone to work in dignity, with hope, in harmony with our environment, with kindness and empathy for one another.
If we want to make our democracy safe from autocrats, fascists, and extremists, we need to do a much better job of thinking through what it will take to create, once again, a country in which everyone feels they are valued, are contributing, and are able to give their children a reason to believe that their lives will be even better than their own.
To get there, we will have to finally decide to rebuild our antiquated, dangerous infrastructure; build out a world-class internet that is cheap, fast, reliable, and ubiquitous; and build basic- and applied- research labs that will enable industries all over this country to become global technological leaders.
More than anything else, though, we will have to do what is necessary to make sure that our people, all of them, have the education and skills that will justify high wages in globalized labor markets.
What I am describing is not a redistribution program. It is not a way to fund more consumption. There are many people in our society who deserve a better shake. But the most urgent need is for smart investment in our future. If we invest wisely, particularly in new knowledge and in the education and skills our people–all our people–need to generate and apply that knowledge, we will be able to fund Social Security, Medicare, Medicaid, affordable housing, home care for the elderly, and all the rest. If we do not invest wisely now, however, we will see more and more earnings and savings go to servicing our debt, and our dreams will dwindle.
One more point. None of this will work unless we transform our institutions, modernize them to be much more productive, much more efficient than they are. Yes, we need to invest more in education and job training, but our education and job- training institutions are ossified, designed and built in another age to meet a very different set of challenges. Since the 1970s, we have poured money into them in an effort to meet greatly expanded needs, seen the per-student costs skyrocket, and the outcomes for students barely improve at all.
Yes, this country needs to start thinking in terms of smart investment. But, at the same time, it needs to realize that the structures it invests in must be redesigned for high performance. Do those two things, and there is no limit to what we can accomplish together. Fail to do them, and there is no end of trouble ahead.
See you next July. I wish you a fine winter, and an even more rewarding spring.