The tenth anniversary of the financial crisis - in particular the collapse of Lehman Brothers - has prompted a rash of media reminiscences about what happened, commentary about why it happened, and speculation about whether it could happen again.
Many of the pundits draw a straight line from the events of 2008 to the current populist political moment with its rejection of “the elites” and “experts” and support for outsider candidates like Donald Trump and Bernie Sanders.
There’s only one problem: the straight line that led to today’s populism started a long time before. In fact, the economic insecurity working Americans have experienced since 2008 has been there for decades. It’s just that the elites didn’t notice.
In a typically solipsistic and self-serving move, the elitists in finance, big business, the media and politics are using the tenth anniversary of the financial crisis to pat themselves on the back for reforming the system, even while acknowledging that their actions may not have looked fair to the average American who lost out while Wall Street executives emerged even richer.
This totally lets the elitists off the hook. The roots of populist resentment go back much further and are far broader than the collapse of the financial system. They include the way power has been concentrated in the economy and government; the way globalization and immigration have affected our economy and society; the way the political system has been completely corrupted; the way families and communities and the social fabric have been ripped apart with nothing but arid techno-commercialism to take their place, and the way the top 20 percent or so who have benefited from all this have become completely detached from and show no empathy for the majority of working Americans.
This isn’t a partisan political issue: during the sixteen years of George W. Bush and Barack Obama, with various changes of political control in Congress, half of American households saw their incomes go down (with the poorest seeing their incomes go down the most). It made no difference who was in charge politically; the rich got richer and half the country got poorer.
This is the problem with the elitist agenda: too much cold economic theory, too little warm human empathy.
But you can go back even further than the turn of the century. One startling example: the 80 percent of American workers with production and nonsupervisory roles brought home an average weekly wage of $723.67 in 2016, according to the Economic Policy Institute. That’s about 2 percent less than they did in 1972, when the inflation-adjusted average was $738.67. In forty-four years our economy delivered working Americans a 2 percent pay cut. Surely it is evident that something serious is wrong: something that we can’t just ascribe to the “failed policies” of one side or the other in our political game? Isn’t it obvious that American capitalism itself has gone haywire?
It’s time to question the fundamental assumptions that have undergirded our economic debates for decades. We have been told—and by the way, I myself (in my former role as a political advisor) have done my fair share of telling—that the centerpieces of the elitist economic agenda, those well-worn articles of faith for both parties in recent decades—globalization, automation, immigration, and the centralization of policy-making in the hands of technocrats—are improving our lives. By some measures, they are. But look at the measures that matter most.
The fundamental expectations of the American middle class have been shattered by the elitist consensus. We grew up thinking that our children would have a better life than us—no longer a safe assumption. We believed that a job would always be there for everyone who wanted one—no longer true. We were told that if you worked hard you could provide a good, secure foundation for yourself and your family.
Well, what a hollow promise that is for most working Americans today, who struggle to afford the basics of a decent life on the inadequate and often unpredictable wages of a typical job.
The response of the elites is instructive. They talk about today’s brutal, merciless, sink or swim economy as if it were some kind of inevitability, fashioned by forces beyond anyone’s control. But collapsing economic security is not inevitable. It is the direct and intended result of elitist policy, designed, built, and maintained by the people at the top: the CEOs and the Wall Street wheeler-dealers; the technocrats and bureaucrats; the bankers and the accountants and the management consultants—and of course their political stooges in Congress and elsewhere throughout the system.
We keep hearing that a “flexible labor market” is the future—that the jobs are there for people who are willing to learn new skills, to move to where the work is. The elitist ideologues instruct the lower orders: Why, you must adapt! You must be willing to chase employment opportunities across the country. You need to understand that you will have to make multiple career changes throughout your life to keep up with the forces of supply and demand.
Much of that is true. But we have to ask: why didn’t the elites think about all this before they took a wrecking ball to millions of people’s economic security? Why didn’t they make even the slightest preparation for the wrenching transition that they engineered? Why are they only now, decades into their experiment, starting to realize that people have been hurt—and badly?
The growing sense of economic insecurity is the primary force behind the populist surge in America, and it is the reason voters in 2016 rejected the mainstream elitist candidates in both the Republican and Democratic parties.
It is of course because the victors in the elitist economy were blissfully ignorant of the lives of its victims. Who benefits in a flexible labor market? The wage earner who must move every few years, who keeps being told they’re no longer needed, who can never plan for anything because they never know how many hours’ work they will get and how much they’ll be paid, who has a mortgage that’s underwater, school-age children with all the costs that entails, who can’t count on health care and other benefits from their employer anymore, whose spouse has to work two or more jobs on the side just to keep the show on the road?
No; the winners from our much-lauded “flexible labor market” are the CEOs and company shareholders. They are the big businesses with a fleet of lobbyists in Washington. They are the successful entrepreneurs with capital set aside. And this is the problem with the elitist agenda: too much cold economic theory, too little warm human empathy.
If there’s one piece of evidence that most powerfully tells this story, it’s the connection between worker productivity and wages. For decades after World War II, as America’s economy grew and became more productive, workers shared in that growth. Productivity and wages grew in line with each other. But then something went wrong. The economy continued to grow and become more productive, but wages actually went down or stayed flat, even as economic growth and rising productivity boosted the incomes of the richest Americans who own businesses instead of just working for them.
To appreciate the scale of the problem—and the revolutionary scale of the change we now need—it’s vital to understand exactly when things started to go haywire, the point when incomes began to stagnate. It wasn’t the financial crash and the Great Recession; it wasn’t even the dot-com bust or the sharp downturn of the early 1980s. It preceded all those disruptions.
Our economic malaise goes back, in fact, to the early 1970s. Up until 2016, inflation-adjusted wages for the typical American worker had been falling or flat since 1972—that’s four decades of stagnation. Thankfully, we are now seeing some improvement, thanks to the Trump administration’s pro-growth policies. But we’ve had growth before during those four decades, including during the Reagan years. There are deeper structural problems, and the populist revolution needs to address them.
The point in the early 1970s when things started to go wrong for the American worker coincides with a huge change in economic policy, and it was all to do with the concentration of economic power. A new doctrine, quickly adopted in all three branches of government, argued that competition in the economic marketplace was less important than outcomes for consumers. As long as corporations were operating “efficiently,” they should be allowed to get bigger and bigger and bigger—whatever the impact on workers or local communities.
Since that dramatic break from American tradition, there have indeed been “efficiencies.” The economy has more than doubled in size. Productivity has risen by over 70 percent. The incomes of the top 20 percent of earners have gone up by 150 percent; the top one percent—well, you know the story, up by more than 400 percent since the early 70s. But the vast majority of the working people of America have not shared in that progress. At all.
Their growing sense of economic insecurity is the primary force behind the populist surge in America, and it is the reason voters in 2016 rejected the mainstream elitist candidates in both the Republican and Democratic parties. The reality of mass economic insecurity must be confronted for the grave and long-standing crisis that it is. Looking ahead, America needs an explicitly pro-worker policy agenda to restore economic security.
This means taking on the callous elitism that fetishizes disruption with a shrug and a lecture: “Sorry, this is the way the world is going. Suck it up and get with the program.” At the same time, we must challenge the vindictive populism that pretends “it’s all the fault of the rich, of big business. Tax them more and everything will be okay.” Business—good business—is the heart of any successful economy, including a populist one. My stepfather began as a wage-earning laborer on a construction site but eventually began his own business as a general contractor who could pay wages to others. I’ve started businesses throughout my life and am right now planning my next one, focused on helping families.
The 2008 financial crisis showed us that Big Government can certainly afford to help its friends (and donors). The elite were quick to step in to help those institutions deemed “too big to fail” but passive when it came to the plight of those who are small. In other words, the working people. Not a single executive from any of the companies that caused the global financial crisis has been prosecuted, but when an average American makes a poor decision, she can anticipate economic and bureaucratic punishment for years afterward.
Now it’s time to put the interests of working Americans first, and that’s why the opening chapters of my new book “Positive Populism” focus on Economic Security, Opportunity and Fairness. There you will find a range of ideas - from the Business-Friendly Living Wage, to a revolution in how working people learn the skills they need, to plans to take on the unfair practices of Big Business, that will truly make our economy work for everyone.