Michael Lind: The Clintonites Were Wrong

Is the American economy facing a lost decade? That is the wrong question to ask. The right question is this: Is the United States facing another lost decade? During the past 10 years, inflation-adjusted wages have stagnated or declined for working Americans; net job creation has been zero; and temporary, bubble-driven gains in the stock market have been erased.

This isn't what Bill Clinton and the other "New Democrats" of the 1990s promised us….

As the economist Brad DeLong points out, "The big rise in inequality in the U.S. since 1980 has been overwhelmingly concentrated among the top 1 percent of income earners: Their share has risen from 8 percent in 1980 to 16 percent in 2004. By contrast, the share of the next 4 percent of income earners has only risen from 13 percent to 15 percent, and the share of the next 5 percent of income earners has stuck at 12 percent. The top 1 percent have gone from 8 to 16 times average income, the next 4 percent have gone from 3.2 to 3.7 times average income, and the next 5 percent have been stuck at 3 times average income."

DeLong notes that this pattern does not fit the story of college-educated workers in general deriving a wage premium from the new economy. To make matters worse for the new economy school, from 1998 to 2007, earnings for Americans with B.A.s were practically flat after inflation while the youngest college graduates suffered a slight decline in real wages.

Here's what the New Democrats… who chattered enthusiastically about the "creative class" of "knowledge workers" in the "new economy" failed to understand: The main jump in income inequality took place in the 1970s and the 1980s, before the alleged new economy created by the tech revolution.

The relative decline of wages at the bottom had little or nothing to do with technology or the global economy and everything to do with the weakening of the bargaining power of American workers vis-à-vis their employers thanks to declining unionization, an eroding minimum wage and the flooding of the low-end labor market by unskilled immigrants from Latin America, both legal and illegal.

Having misdiagnosed the problem, New Democrats, including Clinton and Obama, have consistently prescribed the wrong medicine: sending more Americans to college. According to the Bureau of Labor Statistics, most of the occupations with the greatest number of openings in the foreseeable future require only a high school education or an associate's degree, not a four-year B.A….

The glib New Democrats who chirped in the 1990s about the wonders of the new economy were dead wrong. If ever a school of political economy has been discredited by events, it is Clinton-era neoliberalism. And yet the Obama administration's economic team is made up of recycled Clintonites, the very people who misunderstood the actual trends in the U.S. and global economy for the past 20 years.