Walter Russell Mead: Race To The Bottom?

Roundup: Historians' Take

[Walter Russell Mead is professor of foreign affairs and the humanities at Bard College and editor-at-large of The American Interest. A longer version of this article appears in the March/April issue of Foreign Affairs.]

Is America in a race to the bottom, or are we going through what the Austrian born economist Joseph Schumpeter would call a process of “creative destruction”?

As readers over thirty will remember, Ronald Reagan used to tell the story of two boys: a pessimist and an optimist. A psychologist put the pessimistic boy in a roomful of toys; he sat around morosely worried that if he played with the toys they would break and he would be blamed. He put the optimist in a room with a big pile of horse manure; the boy started eagerly digging. The psychologist asked why and the boy answered that with all that manure on the floor there had to be a pony in there somewhere.

Your attitude toward that story probably predicts what you think about the protests in Madison — and a lot else besides. If you think America is in a race to the bottom as low wage labor in China and elsewhere puts more and more pressure on our middle class living standards here in the US, you probably believe that the Republican attack on public employee unions in Wisconsin is part of a general assault on working people in the United States — and you think this is something we need to fight. You likely think that the decline of the American middle class will destroy our prosperity and stability and that the public unions are one of the last forces standing in the way of an all out corporate assault on what’s left of the American way of life.

I can’t call this view stupid; my first book, Mortal Splendor, argued that the forces of globalization (though the name hadn’t been invented yet) were breaking up the social compact in western Europe and the United States, and that the resulting breakdown and class war threatened America’s stability and prosperity at home and would undermine our position overseas. That book was written almost thirty years ago; it was one of the first to point up the consequences of global industrialization for blue collar workers in the west. I pointed out in that book and in other pieces I wrote at the time that real wages for non-supervisory private sector workers had begun to stagnate in 1973; that was in 1985 and still today the hourly and weekly wages for American workers in inflation-adjusted dollars are less than they were almost 40 years ago....

Tens of millions of Americans aren’t just reading about American decline; they are living American decline. Access to middle class jobs is getting harder — and the jobs still around are less stable. Public services are slowly declining; cash strapped states and towns can’t provide the kind of education that could open more doors. Roads and bridges aren’t being maintained. Retirements are less secure. Health care is more problematic than ever as insurance prices rise — and fewer jobs offer decent plans. College tuition has exploded; we have a generation of college students carrying mortgage-sized student loans even as they scramble for elusive jobs in a snakebit economy.

And there’s more. The wealthiest in our society have gradually been pulling away from the rest of us — not just because so many of them are getting so rich, but because more of them are focused on the global economy and the health of the global system than on the prosperity of the United States of America. This is not just a US phenomenon; around the world we’ve seen the rise of the “Davoisie”, a global elite whose members have more in common economically and often culturally and morally with their fellow jet setters than with the non-jet-setting citizens of their own home countries. Their wealth, power and connections make them disproportionately powerful in this and many other countries; as a result, in the US and elsewhere policy tips more toward the Davos agenda of cosmopolitan globalism than towards national policies aimed first and foremost at promoting the interests of the citizens of the world’s countries....

I see those arguments and have felt their force for thirty years. I’m not, however, convinced that they ultimately make sense. I’ve been thinking about globalization and the future of American prosperity and power since writing Mortal Splendor and in those thirty years I haven’t so much changed my mind about the problems we face as come to a better understanding of the roots of American prosperity — where the ponies are and how they grow.

I wrote in my first post on Madison that I don’t think that restructuring state government is about the race to the bottom: it’s the way to avoid a race to the bottom. That answer needs a bit more elaboration. The world is in a race: a race to be the most efficient and innovative. Cheapness is one way to win this race: cheap labor can be an advantage.

But America shouldn’t compete on the basis of cheap labor: we are not nor should we try to be the Walmart of Work. So the first question becomes how do we compete in ways that don’t involve endlessly ratcheting down wages and benefits? And the second, related question is how can we generate enough demand for American workers so that market forces drive incomes up from year to year and decade to decade?...

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