I am still struggling to come to terms with Trump’s election last week. There is a part of me that would like to at least give him a chance to break the economic and political status quo, having been elected with a mandate to do so. There is another, perhaps more intelligent, part of me that sees him as the ultimate actor, honed by business and reality TV, pretending to overturn the status quo while carefully avoiding the roots of the problem.
As I see it, the majority of the problems facing our country today – wage stagnation, spiraling costs of education and health care, increasing public and private indebtedness, declining quality and durability of goods, decaying infrastructure, increasing homelessness and joblessness, among others – can be traced to one simple reality. In short, the real economy of goods and services has stopped growing at a meaningful rate. This has many causes, but it can ultimately be traced back to resource limits, to the fact that human population is approaching (and probably exceeding, over the longer term) our planet’s carrying capacity. It simply is not possible to continue producing more cars, refining more oil, allowing everyone to purchase bigger houses on more land. These limits alone could be dealt with; it is perfectly possible for humanity to meet its needs and have an acceptable standard of living in a steady-state economy.
The major problem, or at least the one we can actually address, is that the upper class of society – the top 20% or so – continues to believe in economic growth and continues to see rising incomes. The “trickle down” policies that supported increased wealth for the upper class on the basis that it would create rising incomes for everyone only work when the economy is growing. When the economy is stagnant or growing very slowly, as is true now and will be true for much of my lifetime as we face hard limits to growth, then the game becomes zero-sum. Increased wealth for the upper class means decreased wealth and loss of financial security for the middle and lower classes.
Examples of this zero-sum game abound, but I will list a few of the more obvious ones:
- Hospitals, medical professionals, and pharmaceutical companies continue to increase their rates well above the rate of inflation, knowing full well that most of their patients cannot afford these rate increases or the resulting hikes in insurance premiums.
- Universities continue to increase tuition at similar rates, providing both increased compensation and more jobs in their high-paying administrative roles.
- As investment returns decline (due to a stagnating economy), institutions dependent on endowments maintain their wages and wage growth by charging higher fees to students and clients.
- Governments borrow from future generations’ Social Security and general funds to cover exorbitant medical costs for retirees.
- Quality of goods is gradually declining, so even if unit costs remain stable relative to inflation, overall costs increase as appliances, electronics, and household items must be replaced more frequently.
Wages and financial security have been declining for most Americans for some time, but until this last election the political class managed to avoid the issue, focusing instead on distracting Americans with the traditional right vs. left platforms – the wrong problems. Ignorance is no longer possible, as a growing, angry populist movement is quickly becoming fed up with a government that fails to serve them. Bernie Sanders arose out of that movement, and so, most unfortunately, did the president-elect Donald Trump. I’m not sure if Bernie could have defeated Trump, or if he really intended to work toward the right solutions. I’m sure, however, that Trump has none of the right solutions in mind.
If the problem is growing economic inequality and insecurity in a stagnant economy, here are some of the wrong solutions:
- Blame illegal immigrants. Illegal immigrants are not rapists, at least not any more than too many white men are rapists. They are people in this country looking for a better life. They are only here because the leaders of our zero-sum economic game have seen a benefit in employing labor at below minimum wage to enrich the upper classes, and the government has turned a blind eye to the practice. While it is true that the policy of employing illegal immigrants at illegal wages is driving wages down and putting American citizens out of work, the immigrants themselves are not to blame. If we change the policies allowing corporations to employ illegal workers without risk of prosecution, then the under-the-table jobs will dry up, the flow of illegal immigrants looking for a better life will decrease, and those already here will either seek citizenship to qualify for employment or else return to their countries of origin with whatever resources they have accumulated so far. This can be done with compassion for the individuals affected, to be sure that true refugees and asylum-seekers are given assistance to become citizens and to make it clear that policies, rather than people living in poverty, are to blame.
- Focus on “radical Islamic terrorism.” Whatever name we choose to give it, terrorist acts carried out by followers of Islam are a problem, borne out of decades of intervention and “collateral damage” in the homeland of Islam and a religious doctrine that justifies martyrdom and religious violence – no different than some past crusades of Christianity. The size of this problem is, however, very small: so small as to be a distraction from the real economic problem, though Trump has attempted to tie them together in his rhetoric. The number of Americans killed in terrorist acts – 9/11 included – pales in comparison to the number of Americans who die each year because they cannot afford medical care, or who commit suicide because they cannot see hope in their futures after struggling for years without getting ahead or even getting out of debt. The only long-term solution to Islamic terrorism is to cease our interventions in the Middle East for a generation or so while maintaining vigilance against radicalized individuals. This can be done without alienating Muslims, the vast majority of whom are peaceful, compassionate individuals. Indeed, the more we as a society accept Islam, the less likely Muslim youth will be to become radicalized, and the more likely the Muslim community will report budding terrorists within their ranks.
All of the right solutions begin with a simple premise. In a zero-sum game, there is a loser for every winner. Thus in order to stop the immiseration of the lower and middle classes, we must stop the enrichment of the upper class. That alone will not be enough, however, as the current economic status of the majority of Americans is tenuous at best. To really bring wealth back to the working class, we must – gasp – be willing to reduce the wealth of the upper classes. That means lower returns for stockholders, lower bonuses for CEOs, and lower pay for hospital and university administrators.
There are ways to accomplish this that would seem anti-capitalist – capping incomes, say, or imposing government limits on bonuses and profits. There are also ways that would work within a free-market system. As an example, an aspiring doctor must now obtain a lengthy education incurring deep debt, then seek employment with an accredited hospital system that negotiates arbitrary and ever-increasing rates with very little transparency or public accounting. A president could offer debt relief to young doctors who set up a private practice with affordable rates. Or intellectual property laws could be changed such that pharmaceutical patents expire sooner, encouraging competition. Or anti-trust laws could be enforced to break up mega-corporations formed from endless mergers, encouraging greater competition and lower prices. Any number of solutions are possible, and I really don’t know which would be the best. That is a matter for public discourse and debate.
From what I’ve seen so far of the Trump administration, I don’t expect to see any such discussion. Goldman Sachs is one of the world’s largest investment banks, staffed by millionaires who have overseen and benefited from increasing inequality. Bill Clinton chose a former Goldman Sachs executive as his treasury secretary. So did George W. Bush. Obama picked his chief of staff from the company. So far, Trump’s chief strategist, Stephen Bannon, is a Goldman Sachs alumnus, and another former company executive is one of two finalists for his treasury secretary. Trump may be proselytizing to the proletariat about better lives, but he follows in the footsteps of his predecessors on both sides of the aisle when it comes to endorsing the financial system that will continue to enrich the wealthy at the expense of everyone else. (To be fair, I expected the same financial policy from Hillary, albeit without the scapegoating and hatemongering.)
This could be a long four years, and I fear for those who have been scapegoated by Trump and his supporters, in their wrongheaded hope for a better future. My only solace is that perhaps we, as a nation, will see through his empty promises and misdirected anger during that time. Perhaps next time we choose a leader, we will find someone who offers real solutions, who is willing to go against the interests of big corporations, big banks, and wealthy investors and offer solutions that work within a steady-state economy to increase equality and promote financial security for members of all classes.
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