In my last post, I talked about how President Obama overstated the degree to which income inequality can be mitigated through the tax code; how long-term structural changes in our economy explain the disappearing middle class more so than fiscal policy.
Along similar lines, this Financial Times analysis, by Edward Luce, is like a draft of Arctic air.
Luce argues that that the notion of healthy "creative destruction"—of horse-and-buggy giving way to railroads and then automobiles—is no longer true of the U.S. economy:
According to a study this year by Michael Spence, a Nobel Prize-winning economist from Stanford University, and Sandile Hlatshwayo, all net job creation since 1990 has been in the "non-tradable sector." Between 1990 and 2008, the U.S. added 27.3 million jobs, of which almost every one was in services. Almost half were in healthcare or the public sector—both areas in which productivity growth is virtually zero. Conversely, manufacturing's impressive productivity growth, has tracked its shrinking headcount.
If there is an explanation as to why middle-class incomes have stagnated in the past generation, this is it: whatever jobs the U.S. is able to create are in the least efficient sectors—the types that neither computers nor China have yet found a way of eliminating. That trend is starting to lap at the feet of more highly educated American workers. And, as the shift continues, higher-paying jobs are also increasingly at risk...
What that essentially means is that Ayn Rand's mythical private-sector Atlas isn't holding the world aloft on his shoulders; if you combine his powers as a technological attritionist and industrial outsourcer, he's more like the planet-eater Galactus.
For 20-plus years, as Galactus has devoured, we've tried to conjure a different Atlas into existence. State and local governments went on a hiring binge. We pumped up our healthcare industry into the massively inefficient and wasteful beast that it is today. We did this until we could do it no longer.
And the "no longer" moment has arrived.
Atlas really is shrugging, just not in the way Rand acolytes imagined.
Luce cites data by McKinsey consultants indicating that each recession since 1982 has lasted longer than the one preceding it. With a true unemployment rate closer to 11 percent (if you count those who've dropped out of the workforce), the current recovery is the slowest yet.
"At the current rate of job creation it will take another two and a half years to regain 2007 levels—taking the replacement cycle to as much as 78 months. This is destruction minus the creativity," Luce writes.
What's to be done?
The honest answer is that no one really knows.
The conversation that we are having—from the right, a "prosperity agenda" involving yet more regressive tax cuts that will merely further enrich the transnational plutocracy; from the left, yet more blank bullets like worker "retraining" and education—is just laughably, embarrassingly, ridiculously unhelpful.
As I've speculated before, we could be out of bullets.