A proposed Democratic economic vision
Working class people need an economy that has a role for them
Introduction
The 2024 election has shown that MAGA Republicanism has legs. I suspect the current attempt at restricting government will fail and Democrats will be back in the White House in 2029. If nothing changes Republicans will be back in 2033. Meanwhile, the present Trump administration is already making major changes, and will continue doing so, that will accelerate national decline from a Democratic perspective. From a Republican perspective, the Biden administration did the same thing during their four years in power. Both sides are right in the sense that American decline has occurred under both Republican and Democratic presidents for decades (they focus on different things). It has been 78 years since Harold Laski observed that America bestrode the world as a colossus. Since then, the American ruling class has frittered away the resources needed to be a world leader, as did previous hegemons, notably the Spain of Phillip II through Phillip IV. President Trump is now acting to dismantle the US empire without making any effort to use still-extant American power to extract concessions.
With this dismal introduction I still see grounds for hope. I have previously written about how shareholder primacy leads to financial crisis using Hyman Minsky’s financial instability hypothesis as a framework. Paul Krugman has recently written about Minsky’s hypothesis. He shows a plot of the Minsky cycle. We can get an estimate of the length of the Minsky cycle by looking at the famous financial panics from before the New Deal era: 1819, 1837, 1857, 1873, 1893, 1907, and 1929. Krugman cites Gary Gorton who includes three additional crises, 1884, 1890 and 1914. The latter two were British events that had a downstream effect in America. I do not count them as they did not arise from American economic dynamics. The 1884 panic was an American one, but of a lesser size, which modern financial management would probably prevent, making such crises not relevant today. The remaining panics were major events which may reflect a deeper cycle that seems to be back in action as indicated by the appearance of the 2008 panic after a 75-year absence. The 2008 panic was linked to real estate, which is interesting as Homer Hoyt in the 1930’s connected a number of the 19th century panics to real estate cycles. In any case, the dates above give an average spacing of 18±3 years. Next year it will be 18 years since the last panic and the time will be ripe. Given the alternative, financial crisis is a good thing, as I concluded in my financial crisis post:
The 1929 financial crisis triggered the 1929-42 resolution by achieving an across-the-board reduction in elite income/wealth share, solving the excess elite problem. Slavery, rather than financial crisis, was the driver of the 1860-1870 resolution, which was achieved through civil war. Given choices like this, one can understand why I refer a financial collapse rather than the ever more intense political conflict and hatred with which our leaders have saddled us.
As the time for a crisis resolution appears to be ripening, I will outline what I would like to see happen as an outcome from a resolution.
Part I of the vision
I do not think most rank-and-file Americans are looking for handouts as Mitt Romney claimed. And I don’t think Americans are impressed by job creation statistics. Workers don’t need more low wage jobs; they need jobs that pay a living wage. I consulted a living wage calculator for my area and found it to be $19.6 in 2023. This value, adjusted to 1980 terms using the per capita GDP suggests the living wage then was about $3. Minimum wage then was $3.10. The income I earned at the entry level wage in 1980 was enough to provide a living wage, but not anymore. My rent was $300/mo for a two bedroom apartment, making my share $1800/yr. Tuition was $1100/yr for a total of $2900, or the proceeds of 1100 hours of work/yr along with my full-time course load which was quite manageable for a 21 yo putting themself through college without incurring debt.
Today the rent for the same apartment is $10,500/yr and tuition at my university $10,000 for a total of $20,500. To earn this sum with the manageable 1100 hours of work per year I experienced would require a wage of $22, that is, a living wage. Actual wages are around $13-15, so someone like me today could not put themselves through college without incurring debt. So point one of the vision is
Entry level wages should be living wages, as they were of old (before 1980)
Had wage growth that kept pace with productivity growth continued on as it had before 1980, this would still be the case. As I have previously argued in this Substack, this is not because of “structural changes” to the economy, but because of the choices made by political leaders. Make different choices and that world could come back.
The approach of the two parties to problems are very different but equally off-target. The result is an electorate divided by second-order issues like abortion or transgender ideology. The result is an electorate engaging in “thermostatic voting,” shifting between non-solutions offered one or the other party. As an example, consider declining marriage rates, fertility and the crisis of masculinity. Much ink has been spilled on these issues all studiously ignoring the elephant in the room, framing the issue in terms of their preferred ideology. I believe these three things are all interconnected and reflect the same problem, failure to launch, particularly for young men.
Part II of the vision
In the old days, during the New Deal Order, guys who were not college bound either enlisted in the military or continued working the sort of entry-level jobs they had in high school. Entry-level jobs pursued full time would earn enough that they could easily support themselves and after a couple of years on the job were in a position to support a household and became marriageable.
For women, marrying young is taking a risk that this boy she has fallen for will grow into the husband, father, and provider her father was. In the old world even a guy with mediocre talent who never advanced much above the entry level could still earn an income that kept up with the rising standard of living as measured by per capita GDP. A promotion then meant a promotion in living standards making the man a winner in his own eyes (and those of his peers). Today, promotions are necessary just to stay in place; even when you win you lose. A low-IQ, but good-hearted man could serve as an adequate provider and a good husband and father. A more competent man could excel in his career while performing adequately in the others. For women with less-than-average attributes, the less-than-average man could still be a good deal.
Figure 1. Marital age and male height as measures of social and physical well-being
So, women would take the plunge. Figure 1 shows that the age of first marriage for men fell to around 23 (and 20.5 for women) during the New Deal Order because of the exceptionally good marital prospects the New Deal economy offered to men of all abilities. Half of women were marrying within three years of high school. This reality had a powerful effect on college women like my mom and my mother-in-law, both of whom were college-educated women who married at age 26, which was old at the time. The reason they got married was the same; most of the women in their peer group (friends and relatives) were already married and some had children already. They got married because it was “time” to get married, as signaled by the marital status of their peers.
Since the early 1970’s, the age at which people marry has risen suggesting increasing difficulty for young men to become marriageable. The data show marriage age rose in the 1890s to levels not exceeded for a century. This appears to reflect the depression at that time and the hard times it created for everyone, which is confirmed by the decline in male stature. The mechanism leading to higher marriage age in the 1890’s was clearly a reduction in men’s ability to become marriageable caused by a depressed economy. In contrast, the fifty-year rise in marriage age after 1970 shown in Figure 1 was not due to half a century of economic depression, but to difficulties specifically affecting young working-class people. Today, the “time to get married” (as signaled by peers getting hitched) is likely to be in the late 30’s when fertility has naturally declined and there is much less time to have children. In this brave new world, a lot of the men with below average ability or drive are not getting married at all and many are checking out of life. When an entry level job provides an income that purchases a decreasing living standard over time (loses value relative to per capita GDP) the benefits of working are less appealing. Life becomes hopeless and many guys fall into drugs or video games.
What is the solution to this problem? A Democrat might design a program to address this issue. A Republican might chalk it up to culture, blame birth control, or feminism, or some other “cultural” effect while dismissing the elephant in the room, the toxic economic culture that makes life so hard for noncollege-bound people starting out. At least part of the solution, it seems to me is point 2 of the vision:
Restore the economic prospects (and marriageability of working-class boys, as of old
Right now we cannot have that because we need to build ziggurats of finance instead.
Now, of course, we have many government programs that subsize life for poor folks. Conservatives are right that such programs dampen the work ethic and promote dependence. The libertarian solution is to eliminate the welfare programs. What that does is encourage more young people to give up, as life becomes a no-win deal, eventually becoming homeless as they run out of family and friends to free-load off. The homeless were the paupers in medieval times, who eventually died from infectious disease. Dead bodies on the city streets were an everyday thing and cities experienced negative population growth. The only thing that kept them from disappearing was immigration. The libertarian solution, it seems, is to return to those days. Is this the world we want?
Part III of the vision
We do not live in such a world we today. We still have paupers, we just keep them alive through a form of basic income provided though a patchwork of welfare programs. Liberals call for more programs to improve their material lives, but their spiritual and emotional lives will remain barren, making drug use a commonplace. Is this the world we want?
If we had point 1 and 2 of my vision the vast majority of people would earn enough to live a satisfactory life without government help, reserving government assistance for those who have temporarily fallen on hard times (a task already handled by unemployment insurance and Medicaid) and for those who cannot cope with life (for which our current system has no solution). This brings up point three of the vision:
We need to restore a system of public institutions to manage and, if necessary, house those unable to manage life on their own
Part IV of the vison
Finally, there is the role for the Winners, who DuBois called the “talented tenth.” The first three points was how to manage society to provide a better deal for nonelite people, those I called Losers in my previous two posts. These are the people the neoreactionaries call Hobbits. If you have read Tolkien’s works or seen the Lord of the Rings films who will know that hobbits are ordinary people concerned with their ordinary lives and those of the people around them. But there are also the major figures, whose actions drive the story. With one exception, they were all Winners. Among the winners are the protagonists of history. After all, to affect the course of history requires influence, wealth or power, possession of which usually makes one a Winner.
What winners do matters a great deal. But winners are cumulative culture-utilizing apes like the rest of us and are subject to the same culture transmission heuristics and biases. They earn symbolic markers signifying honor, prestige and status from their achievements. What these markers consist of is somewhat arbitrary. At present American capitalism operates under the shareholder primacy (SP) culture in which growth of shareholder value (capitalist wealth) is the objective of economic activity. Ted Turner’s famous quote life’s a game, money is how we keep score featured at the top of this piece captures this connection between business objectives and prestige/status.
The state sets economic policy that affects the symbolic markers of success. Under the New Deal Order, the business environment selected against the SP culture practice of maximizing shareholder value. Selected for was stakeholder culture (SC), in which the objective of capitalism is to grow productive capital—and the economy with it (which was the original purpose for which capitalism and modern science were invented). As indicated above, ordinary people did much better under SC than SP culture. This brings us to point 4:
A measure other than money (market capitalization) is needed to “score” elite achievements.
All this needs to happen before AI takes the whole thing out of our hands.
I find your analyses very powerful and I basically always agree with them to the extent that I understand them. I have long been guided in my own understanding of where we are and what’s needed by a much more, shall we say, straightforward analysis, which is attributed to FDR:
“If American democracy ceases to move forward as a living force, seeking day and night by peaceful means to better the lot of our citizens, fascism will grow in strength in our land.”
You focus in this post on something I think is absolutely vital and foundational to this moment in our history, which is that Neoliberalism has made it virtually impossible for millions of Americans to ‘make a living’ in America and this needs to change. And this addresses a part of what I believe is meant by that FDR quote above: If people know that, at the very least, they can enter the workforce and make a living wage, this will go a long way towards ‘bettering the lot’ of our citizens and make them far less vulnerable to the attractions of demagogues promising to better their lot.
However, I think that there’s more involved in addressing the threat of growing authoritarianism: it has to do with democracy moving forward as a ‘living force.’ To me, this involves much more than overcoming economic insecurity or transitioning back to stakeholder capitalism dedicated to universal economic viability. It has to do also with being civically viable. With having a sense and even the reality of agency and of worth beyond money as how we keep score.
It seems to me that the period after WWII through to Reagan was a period characterized as much by the development of a robust civic sector as by the economic benefits of stakeholder capitalism. Isn’t much of the MAGA movement tied to the loss not only of the capacity to make a living but also of the capacity of for agency as a community member and civic actor?
In the NYTs 2/12/25, Tessie McMillan Cottom described Musk’s effectiveness and impact as his capacity to make the our world, meaning American politics, governing, culture, etc., more sensible to millions of Americans for whom government and civic life are remote, unassailable, scary, alien.
A big question is how do we do this for those millions of Americans through democracy as a living force?
Mike, how many “paupers” do you know well enough to have insight into their “spiritual and emotional lives”? This is stereotyping, and in my experience, wrong. (My experience being someone who has worked with poor people professionally for 25 years, mentored youth for more than 30, and lives with two of my adult mentees.)
Most poor people I know are deeply involved in their family lives, as parents or caregivers for vulnerable elders or young adults. I see the same range of spirituality as in middle-class people, with perhaps more of a skew to the deeply religious end of the spectrum.
In my experience, people become addicted because their parents were, or as a reaction to other trauma such as sexual abuse. Many young adults go through a drug-using phase and then mature out of it. The effect on kids varies depending on when that maturing phase takes place.