Hillary and the New Gilded Age

A slow growth U.S. economy is the bane of the middle class. Or is it the bane of the wealthy as well? While consumer demand is repeatedly signaled out as the engine of American economic growth, containing costs in a globalized economy with China’s underpaid work force producing low-cost goods has meant stagnant nominal wages and falling real wages. Falling to such an extent that some studies show that for those not in the top 10% of income earners, wages are where they were in 1987. And for those not in the top 1%, wages are stuck at 1998 levels. As well, wealth is increasingly concentrated in the hands of the top 1%, or even the top 0.1%. Thanks in part to the collapse of housing which has not rebounded the way stocks have. We are, it seems, in a new Gilded Age.

Mark Twain's term for Reconstruction-era economic life, was not a dark, depressing time, like the 30's. It was a time of boom after the horrors of the Civil War. A boom filled with migration of low-skilled labor into America, the rise of skilled wages far above skilled wage levels available in Europe, and great inequality as well. So, it's not too hard to draw grand comparisons between the late 20th and early 21st century, and the late 19th century. Both are driven by innovation and disruption, but our current disruption is entirely techonological and economic, rather than belicose. Both have large numbers of poor, uneducated and unskilled workers pouring into the country. Both have stagnant wages for the not-highly-skilled workers and growing wages for skilled specialists. Both have the very wealthy accumulating even more wealth. Both have economic panics every decade or so.

But as well, one can trace the rise of North American bureaucracy to the Gilded Age. Management and information gathering and reporting systems to handle the emergence of diversified corporations, the infamous trusts, led to the emergence of statistics as a growing branch of industry and government. And since that time, how to manage a large and ever more complex economy has led to more and more economists and statisticians and policy planners. And they have to be paid, but more importantly, they have to intervene by definition. If you are managing information, a statistic is raw material for your policy plans. It was soon after the Gilded Age that the income tax came into being. Then some 30-odd years into the 20th century, FDR's centralized planning was seen as necessary to rescue the nation from the Great Depression. And we're still arguing over how that should have been done. We're still arguing over why the Great Depression even happened, or lasted so long.

So how to raise wages in this new so-called Gilded Age? With capital more mobile than ever? And trillions sitting offshore waiting for corporate tax rates at home to come down to say the levels in Canada? If it were up to Hillary, you decree a rise in the minimum wage. If it were up to many GOP candidates, you cut payroll taxes and cut spending to try and begin to balance the books. And you lower corporate taxes. It would be a mistake to apply Mark Twain's label too closely to today's world. To try and punish corporations into raising wages and repatriating profits seems more a case of Ted Kennedy-Jimmy Carter era economic policy. How to encourage corporations into providing better wages for skilled and relatively skilled labor, is a problem best solved with less mandates and more incentives.

Posted by Keeley at July 13, 2015 8:15 PM
Comment #396690

The problem I see is that we’ve put the whole federal government on auto pilot for the last 6 or 7 years and as a result there is no way to provide any incentive to change anything. Until there is enough political will to do something about all the CRs and stop the occasional bs outrage about the debt limits we are going to be left in this era of stagnation. And that’s exactly what the politicians and the beltway bandits want anyway.

As long as we keep federal spending around 20% of GDP I’ll stay, but my long range plans are to do what my forefathers did and catch a boat out of here (or plane, or spaceship). Ojochal here I come…

Posted by: George in SC at July 21, 2015 11:42 AM
Comment #396704

I’ve known people who left the country recently. One married a Finn and moved to Finland for the free education- a Masters. Another couple moved to Ecuador for the lower cost of living and medical care.

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