The following account of economic events in this country over the past sixteen years appeared recently in the Wall Street Journal. As to our thinking it represented an accurate and honest summary of what has occurred, we are reproducing it in four parts as four separate postings. If both sides, Democrats and Republicans, can agree on the occurrence (Buckminster Fuller used to say “a problem correctly stated is a problem solved”), perhaps they can come together on its solution. At any rate, what the article makes clear is there has been a major shift, as great as that between the Roaring Twenties and the Great Depression, in our economic situation which requires a new paradigm as bold as the New Deal.
“The Great Unravelling,” an article in four parts for the Wall Street Journal by Jon Hilsenrath and Bob Davis
When U.S. economic leaders in April 2000 gathered in the White House to mark a decadelong expansion, the consensus was clear. Trade, technology and a wise central bank had helped fuel an era of rising prosperity.
Stick to that model, Alan Greenspan, then Federal Reserve Chairman, told the assembly, and “I do not believe we can go wrong.”
Much did go wrong. The economic stability and robust growth the U.S. enjoyed in the previous decade proved to be in its final throes. After 2000, the economy would experience two recessions, a technology-bubble collapse followed by a housing boom, then the largest financial crisis in 75 years and a prolonged period of weak growth.
The past decade and a half has proved so turbulent and disappointing it has upended basic assumptions about modern economics and our political system. This string of disappointments has resulted in one of the most unpredictable and unconventional political seasons in modern history, with the rise of Donald Trump and Bernie Sanders.
Median household income, accounting for inflation, has dropped 7% since 2000, and the income gap widened between the wealthy and everyone else. Even though official measures of unemployment have receded from postrecession peaks, seven in 10 Americans believe the nation is on the wrong track, the most recent Wall Street Journal/NBC poll found.
The 2016 election is shaping up in large part as a referendum on an economic model that is widely seen as failing. Messrs. Trump and Sanders argue that policies celebrated 16 years ago no longer work for most Americans, a message that is resonating widely among those who have most suffered the consequences. Mr. Trump confounded expectations to win his party’s presumptive nomination. Mr. Sanders, though losing his, will take his message to the convention and has yanked his party to the left.
This article begins a series examining the economic roots of that disillusionment and its social and political consequences.
The disappointments are many and deep seated. China, whose vast market seemed to promise prosperity for U.S. exporters, itself became a giant exporter, dealing blows to U.S. communities far more damaging than earlier import waves from Japan and Mexico.
Technology delivered gadgets and software but didn’t produce the anticipated economic growth or jobs, especially for those without advanced education. Central bankers, once deified globally, couldn’t foresee or manage the financial storms that eventually leveled the global economy.
Economic maelstroms deepened social problems, as working-class communities especially were challenged by drugs, out-of-wedlock births, a dearth of employment opportunities, suicides and fraying social institutions. The problems are scrambling Democrats and Republicans, sending them to new populist frontiers and forcing party leaders to grapple with their purpose and values.
Contributing to the rethink is a sense that Washington, because of gridlock, venality or incompetence, is itself broken and can’t fix what ails America.
Workers have come out short-handed. In 2000, they collected 66% of national income through wages, salaries and benefits. That dropped to 61% after the recession and has only recently partially recovered. Profits have risen to 12% of income from 8%.
In the process, 30 years of established wisdom about how to manage capitalism has been upended by events and challenged by Mr. Trump and Mr. Sanders—the most serious challenge thus far to the post-Cold War economic consensus. Red states and blue states are being redefined along new lines: haves and have-nots.
A recent Pew Research Center poll found 61% of Trump supporters and 91% of Sanders supporters see the economic system as tilted toward powerful interests. Both embrace a new nationalism that rejects global integration and the influence of what they describe as moneyed interests.
America had an economic model that wouldn’t fail.
American median household incomes, adjusted for inflation, have fallen 7% since 2000. In the process, a persistent majority of individuals have come to believe the country is on the wrong track.