Capitalism is failing the middle class … Global capitalism isn't working for the American middle class. That isn't a headline from the left-leaning Huffington Post, or a comment on Glenn Beck's right-wing populist blackboard. It is, instead, the conclusion of a rigorous analysis bearing the imprimatur of the U.S. establishment: the paper's lead author is Michael Spence, recipient of the Nobel Prize in economic sciences, and it was published by the Council on Foreign Relations. – Reuters Blog/ Chrystia Freeland
Dominant Social Theme: It's official. Free markets don't work very well. Or maybe they work too well. In any case, they need help.
Free-Market Analysis: This thoughtful article that Chrystia Freeland has written for her Reuters' blog presents the conclusions that capitalism is not lifting all boats equally; or, to mix metaphors, technology is proving to be a two-edged sword. Productivity has risen but middle class wages and opportunity have not kept pace.
The conclusion is not hers alone but that of Michael Spence and co-author, Sandile Hlatshwayo. In her blog-article published a few days ago, Freeland reports on their scholarly paper examining the past 20 years of corporate and economic history. In this article, we'll examine Freeland's analysis to try to show how once more how arguments developed in a certain manner inevitably lead to certain conclusions.
As she is a mainstream business reporter, we are not surprised that Freeland comes to the conclusions she does, but it is instructive to follow the logic. What we end up with is a situation where the arguments have been framed in a certain way to develop a certain result. For anyone interested in thinking beyond this format, understanding how this occurs is critical.
Freeland doesn't come right out and say it, but if technology is leading to increasing middle class difficulties, then some extracurricular force will have to be brought into play to rectify the situation. This is one of the oldest and hoariest dominant social themes of the power elite: Market failures demand government relief. It is elaborated on many ways round the world every day.
Who is Chrystia Freeland? Her blog contains a brief bio. "A global editor at large for Reuters, prior, she was U.S. managing editor of the Financial Times. Before that, Freeland was deputy editor, Financial Times, in London, editor of the FT's Weekend edition, editor of FT.com, U.K. News editor, Moscow bureau chief and Eastern Europe correspondent. From 1999 to 2001, Freeland served for two years as deputy editor of The Globe and Mail, Canada's national newspaper. Freeland began her career working as a stringer in Ukraine, writing for the FT, The Washington Post and The Economist."
Freeland has the intellectual firepower to analyze the work that Spence and Hlatshwayo have produced. She points out Spence himself is obviously neither "protectionist nor a Luddite" as he clearly promotes the benefits of globalization: "Many goods and services are less expensive than they would be if the economy were walled off from the global economy, and the benefits of lower prices are widespread." Spence suggests that globalization has provided "tremendous" poverty reduction in such countries as China and India and "more is yet to come."
Research on Freeland's part leads her to the conclusion that Spence shares some of the same perspectives as David Autor, an MIT economist who has written according to Freeland that "technology has had a polarizing impact on the U.S. work force – it has made people at the top more productive and better paid and hasn't had much effect on the hands-on jobs at the bottom of the labor force. But opportunities and salaries in the middle have been hollowed out."
Freeland sums up: She believes that Autor's and Spence's observations ought to be combined because together they sum up the larger trends taking place in the 21st century. Globalization and technology are drivers of prosperity, but not for everyone. The poor are benefiting and the thought-entrepreneurs who invent or manage businesses. But the middle class is getting squeezed, not just in the US but Europe, too.
Such a conclusion is not exactly earth shattering and Freeland, to her credit, admits it. But if it is such old news, she asks, why are businesspeople and politicians resolutely ignoring it. She points to a recent breakfast at the Council on Foreign Relations that she moderated as evidence of the problem. The speaker was Randall Stephenson, chief executive officer of AT&T, and his topic dealt a "transformative shift" around the world thanks to electrification, technology and the subsequent "velocity of commerce" and productivity.
But when Stephenson was asked about the effect of these trends on technology, Freeland implies he was somewhat dismissive. "While technology allows companies … to do more with less, I don't think that necessarily means that there is less employment opportunities available. It's just a redeployment of those employment opportunities. And those employees you have, my expectation was, with your productivity, their standard of living has actually gotten better."
Freeland, to her credit, is willing to analyze such corporate optimism in terms of Spence's work, which says something entirely different. Technology and "progress" are NOT making everyone better off. But the gradual impoverishment of the middle classes may not be deliberate. Spence in fact claims that large companies are taking advantage of modern technologies exactly as they should. Efficiency is going up, productivity is up. Multinationals are benefitting from advances exactly as they should be. And here's the kicker – Freeland's own analysis: "Since global capitalism is the best way we've come up with so far to run our economy, that creates quite a dilemma."
Here's how Freeland finishes: "Spence is honest enough to admit that he has no easy answers. But he has posed the right question. American politicians in both parties are focused on a budget debate that is superficial, premature and ultimately about something pretty easy to figure out. Instead, we should all be working on the much bigger problem of how to make capitalism work for the American middle class."
At the beginning of this article, we wrote we were going to comment on some of Freeland's conclusions, and the two of them that we want to examine briefly are 1) the idea that global capitalism is the best social and economic paradigm and 2) that "everybody" should be trying to figure out how to make "capitalism work" for the American middle class.
Let's look at point one. We would argue that global capitalism is actualy the outcome of a deliberate societal reshaping that has as its underpinnings judicial corporate activism and central banking fiat money flows. Without Western judiciaries virtually creating the corporate entity, there would not be any such thing as a multinational.
Point two: Without fiat-money flows, corporations would not have the markets and wherewithal to make disposable consumer goods that pass for modern technology. The accumulated ephemera of modern societies is startling but that doesn't make it necessary. One of the problems that Chinese leaders have in directing consumer inwards is that the various gadgets that its factories are exporting to the West are disdained by their own populations.
These are the issues, then, which we would advance to reframe Freeland's conclusions. Western capitalism is by no means preordained and has been created by mercantilist and judicial fiat. Absent "laws," industry would be generally consist of smaller companies oriented around partnerships and individuals and perhaps focused on local manufacturing. The "global" industrial society we would argue is a largely artificial one and it is most questionable whether absent the Anglo-American power elites that created it, it would ever have evolved in the manner that it has.
The middle classes are getting squeezed in the modern age not because free-market capitalism is mercilessly efficient but because the paradigm itself is relentlessly artificial. It is driven by vast capital surges created out of money-from-nothing. Its vehicles are multinationals that would not exist without judicial activism. There is no such thing as a corporation actually; there are only people – making things and buying and selling.
Western middle-class citizens are becoming more impoverished because Western capitalism is merely an artifical agglomerator of capital and opportunity. When industry has been artificially centralized and control is held by only a few, the results of further efficiencies will inevitably reduce employment. It is hard to wrap one's head around it, but globalism is an entirely artificial paradigm. It has been deliberately cultivated in our view by the power elite that needs a pretext to sociopolitical global infrastructure in order to create one-world government.
It is always amazing to see how this priority infects almost every aspect of the Western dialogue and has turned mainstream western media into a gigantic echo chamber that repeats the same conclusions over and over again in cleverly-cloaked, seemingly different but all-too-similar ways. The Internet has provided alternative conclusions and "out-of-the-box" thinking on many of these issues. And that's one reason it's being attacked by the powers-that-be. It spawns truth and enables critical thinking – neither of which are welcomed in the New World Order.