Noah Smith is such a brilliant guy, I have no idea why he wrote, Guess What’s Destroying the Middle Class? He started with the silliest notion that there are three reasons why middle class wages are falling: robots, unions and China. I realize that there are a lot of people who talk about this, but don’t we all know that it is a little more nuanced than that? That it isn’t that simple? If you asked me, I would say that the primary reason for falling wages is something else entirely: the new normal coming into 2001 was that middle class wages were stagnant. The difference between stagnant and falling wages is just a matter of degrees. The capitalists in America have gotten even better at siphoning off profits.
There is nothing especially new about this; it’s been going on for forty years. And robots, unions, and China are all symptoms of the larger problem. And the larger problem is that the government has had it out and continues to have it out for the middle class. Let’s do a little Dean Baker 101. High paying jobs in America moving to low paying jobs in China should also reduce the cost of living for Americans. And indeed: televisions are cheaper. But what isn’t cheaper? Healthcare, legal support, college educations. And that’s because we haven’t subjected workers in those fields to the same globalization. And that is a choice that was made by the power elite for the power elite.
I agree with Smith that the robots story is weak. There is a larger problem, however. Our policies allow the owners of capital to capture more and more profits. Robots help in that regard. But technological improvements were arguably as fast during the 1950s as they are today. And we did not see more and more money going to the capital side of the economy at that time. I think that unions are clearly a bigger issue. But even they aren’t huge. I still think the bigger issue is the way that norms have changed. These now allow billionaires to think they deserve their money and don’t owe anything back to society. And this has ripple effects all through the nation, not the least of which being the low taxes on the extremely wealthy.
What really amazed me about the article was Smith’s fatalism with regard to the problem. He concluded that the problem was China — and I think that’s clearly a simplistic way of looking at income inequality — was so fundamental that the only thing that we can do is nothing. “The only solution to the problem of globalization may be to wait.” Chinese wages are increasing. So soon, all those factories will move to India. And then there won’t be any super-large countries for our patriotic companies to run to. In other words: don’t worry American middle class; your wages will rise in just another forty years!
(There’s something I don’t exactly understand with this reasoning. I thought that he was using China as a metonymy for the whole of globalization. But he seems to mean it literally. And apparently, only India can take over China. Somehow, a bunch of countries in Africa wouldn’t work. I don’t understand that, but I don’t suppose it really matters.)
A big problem with the people who claim that robots or education are the only things that are responsible for economic inequality is that these reasons are used as an excuse for doing nothing — or for arguing that there is nothing that can be done. But that is the conclusion that Smith draws from his China hypothesis. And this is strange, because like I said, he’s a brilliant guy. There is no reason for fatalism. The state of the American middle class is not the result of forces beyond our control; it is the result of our own policy choices.