The founder of Stratfor, George Friedman, recently wrote a piece on the crisis of the middle class and linked it to the erosion of American hegemony:
“If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated.”
A chain is only as strong as its weakest link. A bridge does not collapse because the average strength of its span falls below a threshold, but rather when the strength of its weakest link crosses the point-of-no-return. Similarly, society does not fall apart when the average income falls below a certain threshold. But rather, it falls apart when the gulf that divides the rich and poor crosses beyond a threshold. Social inequality, as Friedman noted, is the force that tears societies apart.
Friedman went on to conclude that the left (usually Democrats) will argue for redistribution from rich to poor; while the right (usually Republicans) will argue for free markets. The pitfall of the former is that punitive taxes will drive out the productive forces out of the nation, leading us into a downward economic spiral. The pitfall of the latter is that free markets only guarantee economic outcomes, not social outcomes.
Yours truly believe that the solution is to be found in work. The World Bank flagship annual publication for 2013 is aptly named “Jobs”. And the main message document attests to the ability of work to bring social cohesion:
“Jobs can be transformational along three dimensions: living standards, productivity, and social cohesion.”
If it was all about jobs, then:
“Why has a White House that talks so much about boosting employment steered clear of the most direct strategy that could keep Americans on the job? Since taking office, the Obama administration has studiously avoided paying people to go to work.”
The answer can be found in Ronald Reagan’s 1988 State of the Union Address:
“My friends, some years ago, the Federal Government declared war on poverty, and poverty won”
Ronald Reagan, 1988 State of the Union Address.
We remember that this was the death blow to Lyndon Johnson’s War on Poverty that LBJ declared in his first State of the Union Address on Jan 8, 1964. The Great Society experiment, of which the War on Poverty was part of, began with much fanfare and ended up as a disaster. The two presidents after LBJ, Nixon and Carter distanced themselves from the rhetoric of LBJ – a rhetoric that was written less than eight months after Martin Luther gave his ‘I have a dream speech’, and less than six months after JFK was assassinated. It was a different age then.
Ronald Reagan perhaps nailed the coffin shut. Reaganism painted LBJ’s War on Poverty in the public mind as the epitome of bureaucracy, corruption, and the underserving poor. This is immortalized by Reagan in his inaugural address: “[Big] Government is the problem.”
Thus, it is not surprising that Democratic presidents from Jimmy Carter to Bill Clinton to Barack Obama had faithfully shied away from being associated with LBJ’s War on Poverty. The politicians had reckoned that being associated with the LBJ’s War on Poverty, and thus the word liberal, is at best a political liability.
The 2010 dissolution of ACORN on voter registration scandal, one of the country’s oldest poor people’s organization, reinforced that very fear in the hearts of politicians; and further reduced public support for the War on Poverty on American soil.
So, as we head into 2013, unless there is a change of heart in government, do expect bank bailouts, bridges to nowhere and relief for mortgages to continue to grab the headlines. Liberal concerns on hunger and public jobs would have to wait till the stigma is gone.
Record numbers (47 million) of Americans are on the SNAP program that replaced food stamps: http://www.fns.usda.gov/pd/SNAPsummary.htm
. However, no president would dare to suggest a public jobs program. Yours truly believes that unless the stigma of liberalism is gone, Friedman is partially right, “…the conventional solutions offered by all sides do not yet grasp the magnitude of the problem – that the foundation of American society is at risk – and therefore all sides are content to repeat what has been said before…” Yours truly do not think the leaders do not understand the magnitude of the problem. Rather, they understood it but are stuck in the perception that Great Society is the symbol of all that is wrong with big government.
Good luck in the markets.