After almost 15 years of a disappointing US economy, it is easy to get pessimistic. Incomes for the middle class and poor have now been stagnating over a two-term Republican presidency and well into a two-term Democratic one. The great wage slowdown of the 21st century has frustrated Americans, polls show, and raised serious questions about what kind of policies, if any, might change the situation.
Yet, if you look around the world, you can find reasons for hope.
While wages and incomes have stagnated in the US (as well as in Japan and large parts of Europe), they have not done so everywhere. In Canada, a broad measure of incomes has risen about 10 percent since 2000, even as it has fallen in the US. In Australia, it is up 30 percent.
Illustration: Lance Liu
These are not just any nations, either. They are among those most similar to the US: far-flung, once ruled by Britain, with a frontier culture and a commitment to capitalism. Although Australia and Canada are not identical to the US, it seems worth asking what they are doing differently.
On Thursday, an all-star commission of economists and policy experts from several nations published a detailed analysis of the great wage slowdown. It is a defining challenge of our time, the report said, before offering a meaty list of possible solutions.
“Today, the ability of free-market democracies to deliver widely shared increases in prosperity is in question as never before,” wrote the group, which includes Rockefeller Foundation president Judith Rodin; economist Lawrence Summers; and leaders from Britain, Canada and Sweden. “This is an economic problem that threatens to become a problem for the political systems of these nations — and for the idea of democracy itself.”
In a clear reference to China, the report said that “apologists for anti-democratic regimes” have used the stagnation of living standards in the West as a cudgel to argue that capitalist democracies are broken. Those democracies and China are racing for influence across much of the world, especially in Africa and Asia.
The report is meant to shape the political debate — both in this year’s British general election and next year’s US presidential campaign. Democrats and Republicans have signaled that the wage slowdown will be at the center of their campaigns. Former US secretary of state Hillary Rodham Clinton often says: “It feels harder and harder to get ahead,” while Jeb Bush, in a nod to upward mobility, has named his fundraising operation “Right to Rise.”
The report includes ideas that can appeal to conservatives, including more employee ownership and profit-sharing at companies and a more rigorous approach to infrastructure financing. However, it is hard not to see the report partly as the first draft of an agenda for a presumptive campaign by Clinton.
The commission was created by the Center for American Progress, a Washington research group founded by Clinton allies as a counterweight to influential conservative groups. The report also avoids some topics that make many progressives uncomfortable (public-school accountability and the decline of two-parent families).
Politics aside, it is a deeply serious document — one of the best overviews of income stagnation and inequality that I have read. Its central message is that the great wage slowdown is not inevitable. Yes, some unstoppable economic forces, namely technological change and globalization, have played a role. However, those forces have also brought great benefits to billions of people, and some high-income nations have done a better job capturing the benefits of the modern economy while avoiding its downsides.
AUSTRALIA AND CANADA
“We should not be fatalistic,” Center for American Progress president and commission member Neera Tanden said. “There are things we can do. They may be hard things, but there being hard things you can do is very different from there being nothing to do.”
Two protagonists in this optimistic take are Australia and Canada. They too have suffered from slower growth in recent decades, and they too have rising income inequality. However, the bottom 90 percent of earners are still faring better than the bottom 90 percent in the US, the report showed. An Upshot analysis last year came to the same conclusion: The US’ middle class, long the world’s richest, has fallen behind Canada’s.
What are Canada and Australia doing differently? For starters, a better job with mass education. They have near-universal preschool and do more to get low-income students through college.
“Increasingly, a college education is similar to the high school education of the past — necessary for a prosperous life,” the report said.
The efforts to create a more skilled workforce in Canada and Australia (as well as Sweden and some other nations) have led to better jobs — and stronger pretax income growth.
Also different: more intervention in the free market on behalf of the middle class and the poor.
“It was a reasonable reading of history for a substantial time that the principal determinant of what happened to middle-class families was the overall rate of growth for the economy,” Summers told me. “Today, a substantial part of our success or failure in raising middle-class living standards will have to do not only with overall economic performance, but also with the distribution of income.”
The commission has proposed a list of solutions, touching on many areas I have mentioned here. It also proposes a middle-class tax cut and fewer tax breaks for executive compensation.
Whatever people think about any one of these, the crucial point is broader: Middle-class stagnation is not preordained. No nation has a magic bullet, but many are doing some things better than the US — and have results to show for it.
Three years ago, Daron Acemoglu and James Robinson, in an important book called Why Nations Fail, said that the defining features of national success were broadly shared prosperity and political participation.
The debate over how, or whether, to help the US middle class and poor has its technocratic aspects, as any policy debate must. Yet ultimately, it is a debate about the future of the US’ global standing.
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
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