Aristotle claimed that democracy depended on a secure middle class in a society without a great gap between rich and poor. In other words, Aristotle would have told us our democracy is on the ropes. I didn’t learn this by reading the Greek philosopher himself, but from an insightful paper written by William Galston, a fellow at the Brookings Institution. He took the philosopher’s maxim as a starting point and examined the economic crisis we face. Despite modest and steady job growth and government programs like the Affordable Care Act, Social Security, and Medicare, he foresees trouble ahead if we don’t act now.
Galston sums it up: “If economic growth and well-being are in jeopardy, so are our political arrangements. The bargain is being challenged from without. Competition from rising economies outside Europe and North America — some embedded in democratic institutions, others not — has reduced the ability of established economies to maintain high levels of growth and employment.”
We’ve kept up the appearance of economic well-being by channeling plentiful cash into the stock market, and a rising market has traditionally been a key indicator of economic health. Not now. The vitality of the stock market has little relationship to the job market. “Relatively few jobs now being created offer incomes in the middle range: most are in lower-wage services, and most of the rest are in the high-skilled professions that require advanced training.” This simply intensifies the disparity between rich and poor, in the absence of more robust job growth and/or rising wages: the rich get richer. You know the rest. Companies now have the technological means to increase production without new hiring. This has never been the case in history — we’re standing at a crossroads.
Galson asserts that the central job of democracy is to provide a peaceful, orderly environment where standards of living can progressively get better. When it comes to this central task, we’ve been losing the game for decades — but since 2008, the engine of progress has seized up. “Since the end of the Great Recession, the recovery has been the weakest of the entire postwar period. Only wage increases can generate more vigorous growth,” he says. The threat is clear: either we could slip into the sort of stagnation Japan has suffered since the ’90s, but even more dangerous is the prospect of social disorder. Galston zeroes in on the possibility of revolt by quoting staggering unemployment figures for Europe:
Young adults without occupations, especially those with higher education and rising expectations, are a classic source of political instability. For example, countries that make it difficult to fire workers have made it almost impossible for young adults to find jobs. Unemployment in that cohort has risen to Depression-era levels.
His point? Young, aspiring and yet unemployed youth are the seedbed for disorder, rebellion and ultimately political revolution.
Behind the disparity between Wall Street and Main Street is yet another quiet trend Galson points out, which leads corporations away from national identification, so that the responsibilities of citizenship have a weaker and weaker sway over those who are reaping the greatest rewards.
Here’s how he envisions a way out of this fix:
• Adopt full employment as the central priority for government and business.
• Business should focus on raising wages. Profits are at record levels and cash is plentiful “for large firms who are accumulating huge stocks of retained earnings that languish on the sidelines ore are used to fund mergers and stock buy-backs.”
Here is where his vision struck me as simple and brilliant. He suggests that government could lower tax rates for generous firms with more generous compensation policies. For example, it could favor those that share profits from productivity increases with their workers, rather than siphoning as much profit as possible to shareholders.
Beyond this, he points to a moral awakening as a consequence of reviving the middle class. The renewal would be both economic and moral. The hope that comes with more disposable income encourages delayed gratification. He quotes Benjamin Friedman’s The Moral Consequences of Economic Growth.
The value of a rising standard of living lies not just in the concrete improvements it brings to how individuals live but in how it shapes the social, political and, ultimately, the moral character of a people. Economic growth — meaning a rising standard of living for the clear majority of citizens — more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy. But when living standards stagnate or decline, most societies make little or more progress toward any of these goals, and in all too many instances they plainly retrogress.
In other words, if you want to preserve the integrity of our culture, you must first revitalize the economy for all Americans. He offers some sensible, apolitical, steps toward getting our country, and the developed world as a whole, on the course back toward conditions that will ensure everyone’s opportunity to earn a better life through hard work. In other words, we need to look at employment and wages if we want to preserve the way of life we have all taken for granted until the past few years. Yet, given the current political realities, we need a Congress full of men and women willing to put partisanship aside and deal with the realities we face today. We can only hope they’ll arrive soon.
What do you think? Is income inequality a threat to our democracy?