The Perpetual Downturn

Using his last State of the Union address to lay claims for his legacy, President Obama quite rightly noted that the economy, in disastrous recession when he took office seven years ago, has now experienced a robust rebound. So why is the electorate unimpressed? It's not that the official numbers are wrong. Conservative columnist Jeff Jacoby tried the other day to 'prove' that Obama's claims were false by citing PolitiFact's doubts, but the core reality is what the President says it is; the objections are quibbles. No, the economy by conventional measures is doing what it's supposed to. So why are voters so disgruntled?

The answer isn't so complicated: its the maldistribution of benefits. As economists Piketty and Saez have been documenting for almost a decade now, and as the Occupy movement made clear, wages are stuck, and most folks below the 90th %ile are actually poorer--or at least they feel that way. In point of fact median income has grown slightly, though anemically, over the last generation since roughly 1980, but aspirations for wealth, gadgets, freedom of movement, the luxuries so visibly enjoyed by the privileged 10% (or 1% or .1%) are increasingly unattainable for the large majority. The consequence is a populist malaise ripe for exploitation by terrorists, demagogues, satirists, or activists weirdly dressed in Revolutionary War costumes.

To Obama's credit, he made a valiant effort to explain this dynamic in terms of the 'new economy,' technological advance, the globalization of markets. But he has no real solution. Yes, individuals can make use of the job training he promoted--and the social supports that make it possible for adults to retrain in mid-career. But for most of the would-be or former middle class there really isn't room in the upper echelons of unequally distributed income. That's really something of an iron law, if not a tautology. And it's not just an American problem: the frightening levels of unemployment for young adults in much of Western Europe are a product of the same dynamic. And the start of a downturn in China is even more alarming. In fact none of this should surprise us since it has been the case--with only a brief reprise in the 90s--that sluggish growth and unequal distribution are completely endemic to this 'new economy.'

Where will this lead? The abrasive right-wing populism in this year's Presidential campaign seems like one natural outcome. "Make America Great Again" is just what one might expect to hear at a time when that promise is most illusory. Keep out the foreigners, circle the wagons--these are the lures throughout Europe as well as America.

But is there another way? Can we preserve the technology-driven gains while socializing the benefits? This has been the Left's hope, now gaining steam in the Sanders campaign. Its European variants have been demoralized by Syriza's failure, and by the turning of electorates all over the Old Continent to the Right, but socialist traditions have a deep hold there. More locally, is the emergence of a 'shared economy,' a cheaper, lower tech way of life that includes shared housing, cooperative retail, and the ubiquitous bicycle (and Zipcar and Uber, etc. in place of the privately owned auto) a durable adaptation to new conditions? I hope the young on both continents will work to build an optimistic future in the rejection of free market capitalism, but I fear the turn to more authoritarian governance will look like an easier shortcut.