April 10, 2012 · 1 Comments
By Marie Burns:
Champion of the Rich David Brooks is championing the rich again today in his New York Times column. The good news: “According to The Wall Street Journal on Monday, the revenue per employee at S.&P. 500 companies increased from $378,000 in 2007 to $420,000 in 2011. These efficiency gains are boosting the American economy overall and American exports in particular.” Brooks does not link to the Wall Street Journal story he cites. Instead, he links to an analysis by Tyler Cowen, who directs the Koch brothers-funded Mercatus Center at George Mason University. As I wrote here in my most recent column on Brooks, “Whether the Koch brothers pay Brooks directly or he just does their bidding gratis, the effect is the same: by disseminating Koch propaganda, David Brooks works for the Kochs, even if they’re not cutting him a paycheck.” So thanks, Brooks, for making my point. Brooks lifts most of “his” column from Cowen’s article. (No, Brooks is not stealing. He is doing his job, using the New York Times to give Cowen’s piece a much wider audience. This is precisely as his masters intended. I’m almost surprised the Kochs didn’t talk Pinch Sulzberger into dropping the paywall; after all, it constricts Times readership and thus Koch readership.)
Cowen is giddily upbeat, and right from the top, he and Brooks make President Obama complicit in this “great news” about American resurgence. Cowen writes, “In his State of the Union address two years ago, President Obama promised to double American exports over the next five years…. America is currently on track to meet that goal.” We should all be worried about Obama’s complicity in this particular business success, because I think Cowen is right to finger him, though Cowen isn’t blaming Obama; he’s congratulating him. But as I’ll suggest, what the federal government has done to get business to this place has exacerbated income inequality in the United States.
Cowen makes the case that, as Brooks writes, “America’s export strength will only build in the years ahead.” Brooks adds,
If Cowen’s case is right, the U.S. is not a nation in decline. We may be in the early days of an export boom that will eventually power an economic revival, including a manufacturing revival. But, as Cowen emphasizes, this does not mean nirvana is at hand. His work leaves the impression that there are two interrelated American economies.
Here, the optimistic reader might expect Brooks to emphasize that ordinary Americans are not participating in this newly-dynamic sector of the economy. Lower your expectations. What concerns Brooks is that “a large sector of the economy … health care, education and government … is producing more jobs, but not as many productivity gains.” To his credit, Brooks does acknowledge that Republicans and Democrats see the situation differently, and he doesn’t take sides: “Republicans … love the efficient globalized sector and believe it should be a model for the entire society…. Democrats are more likely to … respect the values of the second sector.” (Even this, Brooks borrowed from Cowen.)
Brooks elaborates a bit on this Republicans v. Democrats theme, but we would have got a much better picture of just how ruthless the Republican/business view of globalization is had Brooks linked to the Wall Street Journal article, a report by Scott Thurm of a Journal analysis of S&P 500 corporate financial reports. The WSJ headline is “For Big Companies, Life Is Good,” and the subhead is “Large corporations emerge from recession leaner, stronger – and hiring overseas.” The analysis demonstrates how top American companies used the recession and financial crisis to cut costs and “gather a greater share of the nation’s income…. Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.” Thurm adds, “Analysts say the recovery is favoring big companies, like those in the Journal’s analysis. Many smaller companies are struggling to stay competitive or to obtain financing…. Economists warn that improved efficiency and continued executive caution are slowing the recovery.”
Cowen, too, acknowledges
the bad news: The new export-based prosperity may not translate into higher wages for everyone, or even most people, in the United States…. Significant segments of the American workforce are likely to continue suffering falling real wages, even in a time of rising export prowess…. We’ll probably see a lot of the American workforce accept lower wages. A lot of American exporters are already experimenting with a two-tiered wage structure, with significantly lower wages for incoming workers. General Electric recently created a whole new class of jobs that pay $12–$19 an hour, compared to the incumbents’ pay of $21–$32 an hour…. More generally, the median wage in the United States has continued to fall, by about 6 to 7 percent, even during the period of recovery from the financial crisis.
Cowen does not seem particularly troubled by this. His suggestion is that domestically-isolated entities like health-care and education providers as well as the government should be more like the S&P companies:
The more America becomes an export-oriented economy, the more it and the nation as a whole will live by the principles of competitive markets…. Our companies will be living under this market pressure, not most of our jobs. We will continue to cut a proverbial ‘deal with the devil’, in which ever more jobs will be created in the relatively protected service sectors, while much of the economic dynamism and income gains will accrue to the capitalists, CEOs and managers who dare to export…. Few observers are willing to countenance a truly open, competitive set of educational, governmental and health care institutions as a remedy.
What he is saying here is that health care, education and government should be further privatized. In this brave new world, Cowen envisions such “improvements” as poor Americans being able to go online to get a medical diagnoses. Really, he wrote that. The poor can’t be lazy, though. They’ll have to adapt: “The American poor and lower middle class will have considerably greater opportunities, at least if they are savvy with information technology and disciplined enough to take advantage of these new free or cheaper goods.” That’s right, those who fall through the cracks just aren’t “disciplined” enough: “These internet tools,” Cowen writes, “reward the self-motivated, who will be disproportionately well educated, even if their parents lack higher education, wealth and connections. Many of the rest will still fall by the wayside.” So Cowen figures the poor will have to rely on the kindness of strangers – mega-rich strangers like Bill Gates. Yay! A nation of beggars!
Brooks is not as forthright as Cowen, but he does slyly imply that Cowen is right when he (a) bases his entire column on Cowen’s article and (b) compares the domestic sector unfavorably with the international business sector.
Here’s how Cowen ends his analysis: “We may need one day to edit the Pledge of Allegiance to read: ‘Two sectors, under God, with liberty and justice for all, prosperity and dynamism for some.’ You heard it here first.” Cowen seems pretty pleased with his prognostications. Of course, Cowen didn’t need a crystal ball or a Ph.D. To come up with this brilliant insight. As economists have been demonstrating for years, we have been headed down this road for a long time.
Cowen treats this two-tiered economy as inevitable. Brooks seems to believe Democrats could moderate the outcome. In fact, so could Republicans. They won’t. But when the U.S. was strongest, they did. Cowen mentions as one means of mitigation, the German labor model, though he doesn’t think much of it. Elisabeth Jacobs of the Brookings Institution, a slightly left-leaning think tank, was more positive. She reported that “the recession had much less drastic effects on Germany’s workers than on U.S. workers,” attributable to Germany’s “coordinated market economy, which emphasizes long-term objectives, and to specific labor market policies intended to reduce the shocks of economic reversals.” Among Jacobs’ observations:
Unemployment benefits are more generous in both value and duration, employment training and services are far more intense and rigorous, subsidies and incentives for re-employment are far more widespread and generous and employment protection remains far stronger than in the United States…. The United States is an outlier in the developed world with respect to unemployment insurance; most other post-industrial nations have federalized programs run by the national government. Our fragmented, 50-state approach creates administrative complexity and costs for businesses operating across state lines and, more important makes policy coordination and reform virtually impossible.
Michael Shank and Thorben Albrecht make the same case in a CNN opinion piece. “Those who believe unions, high wages and workers rights are a burden for business should consider that this sector has been Germany’s most successful.” They explain why. Still, the attitude toward unions in the U.S. is appalling, especially in Southern states. It is growing worse: even as labor unions lose membership and power, that anti-union attitude has spread from the South to Republican-led Midwestern states in recent years. It is true that unions can be just as short-sighted as corporations, but they do force corporate leaders to give their ordinary workers a larger share of the pie. Wise federal labor policy could mitigate the self-interests of both labor and industry. But don’t expect much wisdom to be translated into progressive federal labor law.
At least as bad as our labor policies, if not worse, are our federal tax and trade policies, which favor corporations – and their wealthy executives – over ordinary Americans. Liberal economists have repeatedly stressed that globalization is not some big, bad monster that must destroy the American work force. What destroys jobs are tax and trade policies that allow American corporations to take advantage of ordinary workers here and abroad. Further, tax policies that fail to tax corporate profits, either through loopholes, or in the case of multi-nationals, by keeping their profits safely outside the country and beyond the grasp of the I.R.S., hurt all Americans by making the rest of us take up the slack. Our increasingly regressive state and federal tax policies have the same effect.
Tax laws and even trade agreements are not cast in stone. As situations change, so should our policies alter to meet new challenges. And every single change in law or policy should begin with this question: “How will this policy help ordinary Americans?” That is a question policymakers seldom ask, and even when consideration of ordinary people arises, it is usually comes in the negative: “How much will this policy hurt ordinary Americans? Aah, not too much.”
As long as we have a Republican Congress – and effectively we do since Senate Democrats can’t reach cloture – and a president who thinks G.E.’s Jeff Immelt is the best guy to lead his jobs creation task force, the Koch/Cowen/Brooks prognostication is on track.
Marie Burns blogs at RealityChex.com