SUMMARY: The hottest curve in economics right now helps explain the rise of China, the rise of populism in Europe, and the rise of Donald Trump. From a global perspective, income inequality has gone down. But if you're middle class in the U.S. or Europe, you see the rich getting richer and inequality growing. Economics correspondent Paul Solman examines the widening gap.
 |
| Time period: Around 120 BCE – 1450s CE, Main Routes |
SUMMARY: The Silk Road, the ancient trading route that spanned from Asia toward the West, is where we find journalist Paul Salopek these days. Salopek began his "Out of Eden" walk four years ago in Ethiopia. Now Hari Sreenivasan catches up with him for an update.
HARI SREENIVASAN (NewsHour): You have been following the Silk Road that millions of people before you have.
PAUL SALOPEK, Fellow, National Geographic: The Silk Road was an artery of trade not just of luxury item, not just of commodities, but of ideas, right?
Buddhism moved along the Silk Road routes. Inventions like paper, which conveyed ideas, people, culture, art, music, all of these things moved along these camel caravan roads.
And it’s interesting to be walking them today, Hari, as we’re entering a phase where there’s been a bit of backlash against globalism. And the Silk Road was the first real experiment in globalization about 2,000 years ago.
-----HARI SREENIVASAN: Let’s talk a little bit about the people that you have been walking with.
I imagine that you get to know these people that you’re walking hundreds of miles with.
PAUL SALOPEK: So, I have walked about 6,000 kilometers out of Ethiopia since January of 2013. I have crossed about 13 borders. I have passed through about a dozen countries and territories, many languages within those territories and countries.
And along most of the way, about 95 percent of the way, I have been walking with local people. That’s part of the project. This is a project about humanity. It’s a project about what connects us and what separates us, so I need to have local people.
And it’s truly amazing. In conversations about, is the world becoming more dangerous, is it becoming more turbulent, I have to remind my readers that, at least in my experience, the world is an incredibly hospitable place.
And all of these folks who walk with me, mostly men, but some women, have become like family to me. I literally put my life into their hands. And I’m being passed like a human baton from walking partner to walking partner.
And what does that do? It gives me great heart. It gives me great energy. It proves in a very concrete way, my safety, that most people are good and most people will help you out, even if they’re strangers, even if they’re from another culture, even if they don’t look like you or speak in the same words that you speak.
SUMMARY: The issue of trade, and whether our deals are helping or hurting American workers, is resonating with many prospective voters this election season. For a closer look at how U.S. trade policy is playing out in the presidential race, Hari Sreenivasan talks to Thea Lee of the AFL-CIO and Matthew Slaughter of Dartmouth University.
HARI SREENIVASAN (NewsHour): As the candidates campaign in Pennsylvania, Indiana and elsewhere, one of the issues resonating strongly this year is trade, and whether it's helping or hurting the American economy and its workers.
It's been a long time since trade policy played out this way in a campaign.
This week, our colleagues at NPR have been looking more closely at these issues as part of an ongoing series of reports we are jointly doing about issues on the campaign trail.
For more on how trade is playing out in the race for the White House, I am joined by Thea Lee. She's deputy chief of staff at the AFL-CIO and an international economist. And Matthew Slaughter, dean of the Tuck School at Dartmouth College. From 2005 to 2007, he served on the Council of Economic Advisers to President George W. Bush.
Thea Lee, so, why is this resonating so much right now?
THEA LEE, Deputy Chief of Staff, AFL-CIO: You know, I think we have hit a breaking point.
American workers have really not benefited from a lot of changes in the economy over the last couple of decades. We have seen that real wages are essentially flat for more than four decades. And so we have had a period of tremendous economic growth and technological innovation and globalization, and yet American workers are working harder than ever.
They're more educated than ever. More people in each family are working, and they're not really making ends meet. And trade has been a key contributing factor. It's not the only factor. It may not even be the largest factor. But it is a key policy choice that we have made.
And when we have a decision about a big trade agreement like the Trans-Pacific Partnership, this focuses the attention. And I think we have seen candidates really take advantage of that attention on trade right now, and workers are responding and it's resonating.
HARI SREENIVASAN: Matthew Slaughter, any other reasons that this is catching on right now?
MATTHEW SLAUGHTER, Dartmouth College: I think Thea is right that the American workers, a lot of them sitting around their kitchen tables thinking about voting, they have not performed as well as they had in the past.
They're concerned about their prospects. They're concerned about their children. And yet I think what's important to keep in mind is trade in particular, and globalization more generally, they have generated large gains for America overall over the many decades.
And with the right kind of policies going forward, more global engagement can help more American families in the future as well.
SUMMARY: Syndicated columnist Mark Shields and New York Times columnist David Brooks join Judy Woodruff to discuss this week’s news, including the potential domestic and global effects of the Trans-Pacific Partnership trade deal, defining the role of Congress in the Iran nuclear deal, Hillary Clinton’s campaign rollout and Sen. Marco Rubio’s potential in the Republican party.
JUDY WOODRUFF (NewsHour): So, Mark, let’s talk about something not very exciting, but it’s really important. It’s that Trans-Pacific Partnership that now we know the White House, the administration, a few Democrats, a lot of Republicans, have come together around, apparently.
Is this a good deal, based on what we know about it?
MARK SHIELDS, Syndicated columnist: Well, supporters of trade agreements, including the President, would argue, with logic, that elevated — these trade agreements have raised the standard of living across the globe. They have lifted people out of poverty and led to greater economic activity.
They have been a disaster for American workers, a total disaster, beginning with NAFTA. They have put all the power in the hands of the employer. The employer threatens, if you don’t go along, if you don’t surrender your bargaining rights, if you don’t surrender your health and pension benefits, if you don’t surrender collective union membership, we will move your job overseas.
And as consequence of NAFTA some 22 years ago, documented by our own government, 755,000 jobs lost immediately…
JUDY WOODRUFF: North American Trade Agreement.
MARK SHIELDS: … five million fewer American — five million fewer American manufacturing jobs than there were.
And I just think the pattern, Judy, has been established in our society. We see it where all — the trade agreements, the investor class capital is protected, whether it’s copyrights or whatever, intellectual property, their investments. And they just pay lip service to workers’ rights. And I just — I think it’s one more example.
JUDY WOODRUFF: And the President defended it again today, David, so that means he is siding the investor class?
DAVID BROOKS, New York Times: Yes, I don’t think so.
I agree with Mark’s first point. The greatest reduction in human poverty — in human history of poverty has taken place because of this era of free trade. And it’s been around the globe. As for the domestic workers, it’s complicated. It has hurt some people in some of the unions. There’s no question about it.
The unions were dominant in the 1950s, when Europe was collapsed, when we had basically global dominance, 50 percent productivity gains. And as the world has globalized, the unions have weakened. And there have been some worker rights that have been sacrificed. There’s no question about that.
It’s hurt people with fungible skills that can be replicated by those in China and India and elsewhere. On the other hand, it has created many new jobs. The vast field of research on this, on trade research, there are economists who are skeptics, who cite some of Mark’s numbers.
There are some, and I would say the majority are slightly pro-trade, are more pro-trade and think that, net-net, we have had a growth in jobs and there are certain industries devastated, but other industries created.
Finally, costs. All of us rely and buy goods that come from Asia, from Africa, from Europe. And those goods are much, much cheaper and our standard of living is much, much better because of these cheap goods that we benefit from and that people with lower incomes benefit from.
So, are there losers? We are more acutely aware of the losers than we were. And there are more losers than there were. But are there winners? There are a ton of winners.
MARK SHIELDS: Median household income in the United States was lower in 2012 than it was in 1989. I’m not saying solely because of this, but largely because of this.
Judy, if you want to see the dominance of capital that I think these trade agreements exemplify and embody, all you have to see is the 2008 crisis, economic crisis in this country. Millions of ordinary Americans saw their futures, their savings, their homes wiped out. And they got nothing in the way of relief.
Those who had caused it, who had brought the country to its knees, the big banks and the investment houses of Wall Street, were bailed out by people. They were made whole. So, you had a choice. Who are you going to help and who you going to leave to make out for their own?
We have capitalism for the rich and we have free enterprise, high risk for workers. And I just think this is what it exemplifies. That’s what the resistance is about. Will they defeat the President? Probably not, because I think Republicans will be with him. And I think the opposition has been weakened ever since NAFTA, over 22 years.
American workers have lost their clout politically.
DAVID BROOKS: Global finance — the 2008 crash wasn’t a matter of trade.
MARK SHIELDS: No.
DAVID BROOKS: It was mostly a matter of the interlocking financial network, and which wasn’t about trading goods and services, sort of thing that’s involved in this.
And so I just — I don’t think that’s why the wages have been flat. Secondly, on why the wages have been flat has not to do with trade. It has to do with technology. Trade is a small, small piece of this. If we were closed in, and you were in a steel factory in Pittsburgh, and they invented all this new technology to forge steel with a fraction of the workers, it wouldn’t matter if we had global trade or not. The technology was there and the technology was a lot cheaper. So, technological advance is the lion’s share of why these wages have been flat.
MARK SHIELDS: I’m not saying that 2008 was caused by trade. I’m saying the template of the trade agreement of 1993, of — where capital was emphasized and deferred to, and workers were really basically left at the back of the bus, became the dominant model for our economy.
And it is to this day. It is our politics. And it was in 2008 on the bailouts.
Taxes and government spending. Health care. Immigration. Financial regulation.
They are the issues that have dominated the political debate in recent years and have played a prominent role in this presidential campaign. But in many ways they have obscured what is arguably the nation’s biggest challenge: breaking out of a decade of income stagnation that has afflicted the middle class and the poor and exacerbated inequality.
Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken as successive generations worry about the prospect of declining living standards. No question, perhaps, is more central to the country’s global standing than whether the economy will perform better on that score in the future than it has in the recent past.
The question has helped create a volatile period in American politics, with Democrats gaining large victories in 2006 and 2008, only to have Republicans return the favor in 2010. This year, economic anxiety, especially in industrial battlegrounds like Ohio, is driving the campaign strategies of both President Obama and Mitt Romney.
The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate.
At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.
Not much further down the list is education, probably the country’s most diffuse, localized area of government policy. As skill levels have become even more important for prosperity, the United States has lost its once-large global lead in educational attainment.
Some of the disconnect between the economy’s problems and the solutions offered by Washington stem from the nature of the current political debate. The presidential campaign has been more focused on Bain Capital and an “apology tour” than on the challenges created by globalization and automation.
But economists and other analysts also point to the scale of the problem. No other rich country — not Japan, not any nation in Europe — has figured out exactly how to respond to the challenges. “The whole notion of the American dream,” said Frank Levy, an M.I.T. economist, “described a mass upward mobility that is just a lot harder to achieve right now.”
For the first time since the Great Depression, median family income has fallen substantially over an entire decade. Income grew slowly through most of the last decade, except at the top of the distribution, before falling sharply when the financial crisis began.
By last year, family income was 8 percent lower than it had been 11 years earlier, at its peak in 2000, according to inflation-adjusted numbers from the Census Bureau. On average in 11-year periods in the decades just after World War II, inflation-adjusted median income rose by almost 30 percent.
Matching the growth rates of the postwar period — when the country was poorer, when harsh discrimination against women and minorities was receding and when the rest of the world was weaker — is probably impossible. Yet there is still a vast difference, both economically and politically, between incomes that are rising modestly and not at all.
SUMMARY: For Pulitzer Prize-winning journalist Hedrick Smith, the American Dream depends upon the prosperity of middle class. Ray Suarez talks to Smith about his latest book, "Who Stole the American Dream?" for more on what needs to change to restore the American Dream, economically, politically and culturally.
JUDY WOODRUFF (Newshour): Now: the dismantling of middle-class power and prosperity. Ray Suarez has our book conversation.
RAY SUAREZ (Newshour): One aspect of the current national campaigns addressed by both parties is how hard it has been in recent years to get ahead in America, even to stay in place, as economic turmoil destroyed working lives, cratered housing values, and undermined retirement accounts.
In "Who Stole the American Dream?" veteran journalist Hedrick Smith takes us on a tour of the last four decades, of economic globalization, winners, and losers.
HEDRICK SMITH, author of "Who Stole the American Dream?": Well, they were living the American dream. They had pretty steady jobs. They had rising pay.
They had benefits, health care; 85 percent of the people who worked for companies of over 100 employees had health care, had retirement payments, a monthly check until you died on top of your Social Security, could afford to buy a home, pay off that mortgage over 30 years, and hope that your kids would do better.
That's a big chunk for an awful lot of people.
It made America the envy of the world. It let Richard Nixon go to Moscow and tell Nikita Khrushchev, the Soviet leader, we have a classless society.
RAY SUAREZ: That is also -- the people living that dream are also numerically the largest part of the United States.
HEDRICK SMITH: Sure.
RAY SUAREZ: How did they become so politically weak?
HEDRICK SMITH: Well, they were very strong back then.
As you know, Ray, the environmental movement was strong, put pressure on Washington.
The labor movement was strong, put pressure on General Motors and General Electric and U.S. Steel and so forth.
The civil rights movement put pressure on Washington to open up the American Dream to blacks and other minorities.
Part of what happened to them was, it was so successful. But part of what happened to them was, there was a power shift. There was a tremendous change of power in Washington. And that had a big effect on the ability of middle-class Americans to achieve the American dream.
And the other thing that happened is what I call wedge economics, the splitting of the American middle class off from the gains of the national economy, so that today you can see the economy improving bit by bit, but middle-class people aren't doing that much better.
People at the top are doing real well. Corporations are reporting profits, but the people in the middle aren't doing that well.
Back in the old days, back in the heyday of the middle class, everybody shared in that prosperity. Today, everybody doesn't share in that prosperity. And that's why so many people feel so much pain.
HEDRICK SMITH: Yes, that's a very good question. Let's just take the facts for a moment.
What happened was, the productivity of the American work force from World War II to the mid-'70s grew almost double, 97 percent. The wage and salaries of average Americans, not just assembly line workers, but plumbers, carpenters, small business people, and so forth, they rose 95 percent, so just about the same increase in wages and salaries as in productivity.
The wealth, the growth, the economy, the prosperity was shared.
Since then, however, those wedge economics came in. And what you have seen is productivity has continued to grow, about 80 percent since 1973. But the average hourly compensation of an average worker has grown only 10 percent.
The CEOs' pay has quadrupled, sextupled. The income of the people at the top 1 percent has grown 600 percent.
The Census Bureau says the average male worker since 1978 is making just the same pay, adjusted for inflation. So it's flat in the middle and it's soaring up at the top, tremendous inequality.
I think you're right. People don't favor expropriation. Americans are more tolerant of economic inequality than, say, Europeans and Asians and so forth.
But you do see in poll after poll people are -- there's too many wealth concentrated at the top. There's too much power in Washington lobbyists. The tax system should be changed to raise taxes on the top brackets. Two-thirds of Americans agree in almost every poll to those numbers.
So there is sentiment to change things. But there's not anger in any kind of rebellious sense of word. In fact, there's not even the same kind of anger that prompted the middle class to protest back in the '60s and '70s.
