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Tuesday, Mar 31, 2015

Middle class on its way to Dystopia

More Than Words


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Dystopia - the opposite of utopia - will become the reality for the middle class according to cultural economist and author Tyler Cowen, judged by some to be one of the most influential economists of the past decade and ranked number 72 among the top 100 global thinkers by Foreign Policy Magazine. (Thomas Friedman - move over. There's a new guy on the block.)

In his new book, "Average Is Over," libertarian-leaning Cowen depressingly suggests that the challenge for future thought leaders will be how to motivate people and make them feel better about themselves in a world of permanent income inequality. He says, "We'll see a thinning out of the middle class - more people clustering in a kind of lower-middle class existence.'" He suggests that people will have to readjust their definition of happiness, and with a lot less money. He imagines "a very large bohemian class of the sort that say, lives in parts of Brooklyn . a culturally upper or upper-middle class but with the income of the lower-middle class."

But he believes upper mobility will be easier because self-disciplined, technologically talented people will be part of a new, larger meritocracy. He believes the upper 1 percent will mushroom to the upper 15 percent - a lot more millionaires. They will be the players in a new era of revolutionary technology. These will be the digital natives - Generation Y and the millennials, born since the early 1980s.

Cowen isn't too concerned that society will fracture and riot as the middle class thins out. I would suggest he is too optimistic given the demagoguery we are already experiencing from this administration and others on the left. After the failed recall of Wisconsin's Governor Walker, the Washington Post wrote that riots "may prove to be the common form of protest after unions." The unions proved that by rioting in the state capitol, climbing through windows and trashing the building. And these were better off middle-class people.

In my view, our institutions have never made a national commitment to strengthening social capital at lower socio-economic levels as a means of reducing inequality. It may be seen as politically incorrect to identify those segments of society where the social fabric and family structure has disintegrated. This has been a national tragedy for generations. These are people for whom government at all levels is at the center of their lives - not family, education or jobs. They have been locked in failure, unable or unwilling to break away from government dependency.

This takes us back to a failed educational system - particularly in the early years - and an over-abundance of failing, undereducated parents. To paraphrase the title of Cowen's book, if what they are now is "average," it can't be "over" fast enough.

Additionally, and equally important, would be a resurgence of private sector investment in new age technology, which is still in its infancy. And this doesn't require government intervention. On the contrary, it requires government getting out of the way. (Think of Deng Xiaoping, who in the 1070s fathered China's economic miracle.)

While globalization stripped the middle class of middling jobs that are never coming back, there are careers not yet imagined, as higher education keeps raising the bar with a focus on STEM curricula. The potential of recent innovations from nanotechnology and computerized additive manufacturing (3D printing) are just being realized. Millions of careers were spawned from the industrial revolution - not government. We need these big ticket gains again from risk-taking entrepreneurs.

"Average is Over" is natural outgrowth from "The Great Stagnation," Cowen's popular 2011 book. In it he argued that economic growth has been fine in emerging markets, but these countries are simply using ideas that have already been in place, creating jobs for their people who were living at the margins. But overall, he argued there has been a downward trend in productivity and median income because we haven't had the technological innovation like the world experienced in the past with the inventions of stream power, electricity and the enormous applications from hydrocarbon chemistry, which resulted in explosive economic growth.

Cowen explained, "We are failing to understand why we are failing. All of these problems have a single, little-noticed root cause. We have been living off low-hanging fruit for at least two hundred years. We have built social and economic institutions on the expectation of a lot of low-hanging fruit, and that fruit is mostly gone."

So in "Average Is Over," Cowen looks into the future with revolutionary technologies guiding us out of the great stagnation - the caveat being that some of us will benefit far more than others. In a way, it's always been that way, except it will seem more pronounced for those who remember the halcyon days of good jobs with good pay and benefits for average skill and average performance.

I don't see this ending well. It would take an entirely new era of political and societal development - not the leaderless, divisive and malfunctional society we have today.

John Reiniers is a retired attorney and regular columnist who lives in Spring Hill.

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