Just in case …

… we forget; just in case it might slip our minds; when I was a boy, in the 1950s, most of the people in the world worked like this:

TheDailyInsight-7-23-09-ManPullingCart.jpg

Today, hundreds of millions, mostly in Africa but some people in Asia (which is a HUGE continent) and Latin America still do. But most people in the world now work more like this:

FactoryOperations.jpg

Now it’s important to bear in mind that most of those factory workers in less developed countries don’t make as much as the best paid North American and European workers did in in the 1960s and ’70s, especially not on a comparative basis, but this chart matters:

Global-inequality-in-1800-1975-and-2015.png

What is shows is that about 200 years ago only a tiny handful of people, mostly Europeans but some Asians, too, lived above the stable poverty line of $2.00 per day. By 1975 a lot of us did, but billions, mostly in Asia and Africa were still below $2.00 per day. But today most people in the world have climbed out of abject poverty; too many are still there but in 40 donald-trump-on-abortionyears the most amazing socio-economic change in all of recorded history happened. It represents the very real, human change from the top picture to the second one. It was the net end effect of globalization and President Donald Trump hates it and he hates what it has done to the world in which he (and I) grew up.

It’s not, I think, that he hates the idea that Indian and Chinese and other workers are no longer starving nor that the infant mortality rates have fallen ~ what he hates is the idea that Chinese and Indian workers are working at what used to be almost exclusively American jobs; he believes that those jobs migrated to Asia, and he’s right, they did. And when those jobs migrated the corporate executive and the shareholders in multinational enterprises celebrated but tens of millions of American (and Canadian and European) workers suffered as they and their spouses had to find lower paying jobs.

Now, in an article in Foreign Affairs, Professors Kenneth F Scheve, Stanford University, and Matthew J Slaughter, Dartmouth college, argue that “the backlash against globalization goes far beyond [President] Trump himself. In fact, his presidency is more a symptom of it than its cause. Even as they may decry Trump’s particular methods, many voters and politicians in both parties approve of his objectives.” They say that “For many Americans, a deteriorating labor market brings not just lower wages and less job security; it also cuts to the heart of their sense of dignity [which I have discussed before] and purpose and their trust and belief in their country. That is especially true for those workers who can no longer provide for their family’s basic needs or have dropped out of the labor market altogether. In a series of recent studies we conducted in communities across the United States, we heard the same sentiments from a range of respondents in a variety of circumstances: anxiety and anger about globalization and change that was not related to income alone but more broadly concerned whether Americans can still secure meaningful roles in their families and communities.

This is not unique to America; we have been seeing the same thing in Europe for longer than Donald Trump has been on the scene. Former Prime Minister Stephen Harper discusses the rise of “present day populism” at some length in his new book ‘Right Here, Right Now.’ Prime Minister Harper seems unsurprised by the rise of populism and, in fact, some of his policies from 2011 to 2015 may have been designed to stave off the rise of right wing populists.

Professors Scheve and Slaughter say a lot of what Stephen Harper said: “Even as income inequality has grown over the past decade, it explains only part of the anxiety and dissatisfaction. Changes in labor markets have undermined people’s ability to fulfill their expected roles in their families and their communities. And so people have grown angry at globalization for eroding both their identity and their basic sense of fairness … [and, they explain] … People care not just about their absolute levels of income but also about their incomes over time—relative to their expectations and relative to what their parents made and other reference points. In the United States today, fewer children are growing up to earn more than their parents. For the cohort of Americans born in 1940, more than 90 percent earned more at age 30 than their parents did at the same age. For the cohort of Americans born in 1984, this share had fallen to barely 50 percent. Moreover, a growing number of Americans have stopped seeking work altogether. Labor-market participation, especially among the groups with stagnant incomes, has fallen dramatically in recent years. From 1970 to 2015, among American men with only a high school degree, the labor-force participation rate fell from 98 percent to 85 percent. For American male high school dropouts, that rate fell from 94 percent to 79 percent … [but] … The human consequences of these changes have been devastating. The economists Anne Case and Angus Deaton have shown that many of the groups with the poorest labor-market outcomes (and non-Hispanic whites without a college degree, in particular) have seen their health deteriorate markedly, with surging “deaths of despair”—suicide, drug overdoses, alcohol poisoning—raising overall mortality rates. Other researchers have connected trade-induced income changes to poor health; Justin Pierce and Peter Schott, for example, have shown that counties whose economic structures gave them greater exposure to Chinese competition had higher rates of suicide.

But they argue, contrary to the Trumpian view, that: “If the backlash against globalization is driven by such developments, that does not mean that simply letting the backlash proceed—shutting down trade, cutting off imports, putting up walls—will solve the underlying problems. Despite its very real role in increasing inequality, globalization does, as its champions argue, still do more good than harm. The United States’ connections to the global economy through trade, investment, and immigration have spurred gains for millions of American workers, families, and communities that, in total, exceed the losses. One study by the Peterson Institute for International Economics estimated that U.S. national output and income today would be about ten percent lower had the United States not liberalized international trade and investment as it did over the past two generations.” But, as Stephen Harper says in his new book, globalization has to be made to work for more players, especially for those in the West.

If globalization has substantial benefits but is contributing to the problem of growing inequality,” they say, then “what can be done? The political establishment is offering Americans three alternatives: the status quo, walls that limit engagement with the world, and income redistribution. The status quo sparked the backlash and thus will only further inflame it. Walls will leave the country poorer and less secure … [they suggest that] … Redistribution should be part of the solution. It is a policy we recommended a decade ago, when we proposed making the U.S. tax system more progressive by eliminating payroll taxes for all workers earning below the median income while requiring high earners to pay the tax on a greater percentage of their income. But redistribution is not sufficient, because the problem extends beyond money … [because] … Saving globalization requires restoring to tens of millions of Americans the dignity and the trust and faith in the United States that they have lost. This, in turn, requires building a lifelong ladder of opportunity that will give all citizens the human capital needed to adapt to the forces of globalization. Such a ladder would not guarantee success for everyone. But it is human capital, more than any other asset, that determines an individual’s chances of thriving in a dynamic economy. The United States should expand its investments in human capital at every stage of every American’s life.” Tax reform that aims to go even father and take a million people off the Canadian federal income tax rolls might be one of those big ideas that I still think the Conservative party needs.

I believe that we, the West, need to continue globalization for our own long term benefit but I agree with Prime Minister Harper and with Professors Schreve and Slaughter that we cannot leave working class Canadian behind any more. The two professors offer more ‘solutions’ involving education and vocational training … ideas with which I, broadly agree, but ideas which, in Canada, in the past, have not produced much in the way of results.

Professors Schreve and Slaughter conclude that “The large number of Americans who believe that the United States’ economic and political institutions are no longer delivering enough opportunity are right. It should be no surprise that they are anxious, angry, and open to proposals to build walls to keep out the rest of the world. But,” they say “the right response to these trends is not complacently accepting the status quo or simply letting the backlash against globalization proceed.” Canadians, especially Canadian Conservatives need to take the same message on board.

2 thoughts on “Just in case …”

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