By Harold Meyerson
Wednesday, January 5, 2011;
The city on a hill and the last, best hope of mankind has entered a new period in its history. We are now America, the downwardly mobile.
The problem isn't due to the recession. Would that it were. The decade just concluded is the first in which Americans, on average, have seen their incomes decline. Median household income increased by about $4,000 per decade in the 1980s and '90s: from $42,429 in 1980 to $46,049 in 1990 to $50,557 in 2000 (in 2007 dollars). In 2009, the most recent year for which we have figures, it had declined to $49,777 - but 2009, of course, was a year of deep recession. If we go back to the peak year of the last decade, 2007, we find that median household income was just $50,233- roughly $300 less than it had been in 2000.
Until the housing and financial bubbles burst, of course, we enjoyed the illusion of prosperity through the days of wine and credit. Now we stand on unfamiliar terrain in which almost all the signs of long-term economic health point downward. Our private sector isn't creating jobs at a rate commensurate with our increasing population, much less at a level to significantly reduce unemployment. The share of our civilian population employed has dropped to 58.2 percent - the lowest level since the early '80s, when far fewer women had entered the workforce.
The social pathologies long associated with the inner-city poor - single-parent households, births out of wedlock, drug and alcohol abuse - now stalk the white working class in rural and post-industrial regions far removed from big cities. The middle is falling. Rich Lowry, editor of the conservative National Review, has noted that as wages and employment levels have fallen for the Americans who have graduated high school but not college, their level of out-of-wedlock births (44 percent) has approached that of Americans who haven't completed high school (54 percent). Americans with college diplomas or more, by contrast, have a rate of just 6 percent.
The great sociologist William Julius Wilson has long argued that the key to the unraveling of the lives of the African American poor was the decline in the number of "marriageable males" as work disappeared from the inner city. Much the same could now be said of working-class whites in neighborhoods that may not look like the ghettos of Cleveland or Detroit but in which productive economic activity is increasingly hard to find.
This grim new reality has yet to inform our debate over how to come back from this mega-recession. Those who believe our downturn is cyclical argue that job-creating public spending can restore us to prosperity, while those who believe it's structural - that we have too many carpenters, say, and not enough nurses - believe that we should leave things be while American workers acquire new skills and enter different lines of work. But there's a third way to look at the recession: that it's institutional, that it's the consequence of the decisions by leading banks and corporations to stop investing in the job-creating enterprises that were the key to broadly shared prosperity.
Our multinational companies still invest, of course - just not at home. A study by the Business Roundtable and the U.S. Council Foundation found that the share of the profits of U.S.-based multinationals that came from their foreign affiliates had increased from 17 percent in 1977 and 27 percent in 1994 to 48.6 percent in 2006. As the companies' revenue from abroad has increased, their dependence on American consumers has diminished. The equilibrium among production, wages and purchasing power - the equilibrium that Henry Ford famously recognized when he upped his workers' pay to an unheard-of $5 a day in 1913 so they could afford to buy the cars they made, the equilibrium that became the model for 20th-century American capitalism - has been shattered. Making and selling their goods abroad, U.S. multinationals can slash their workforces and reduce their wages at home while retaining their revenue and increasing their profits. And that's exactly what they've done.
Our economic woes, then, are not simply cyclical or structural. They are also - chiefly - institutional, the consequence of U.S. corporate behavior that has plunged us into a downward cycle of underinvestment, underemployment and under-consumption. Our solutions must be similarly institutional, requiring, for starters, the seating of public and worker representatives on corporate boards. Short of that, there will be no real prospects for reversing America's downward mobility.