The broken US economy breeds inequality and insecurity. Here’s how to fix it
Rising interest rates, a falling stock market, a seesaw in the price of gas, a high dollar and chaos in world finance – we see in all this, once again, the folly of trying to run the world’s largest economy through a central bank. It’s time to rethink the basics: what has happened in America? And what should be done?
Adam Smith wrote: “Wealth, as Mr Hobbes says, is power.” Today in the United States we find islands of wealth and power on one side and an ocean of precarity and powerlessness, alongside poverty, on the other. This is a structural development over 50 years, the effect of politics and policies, but also of industrial change, globalization and new technologies, with intense regional, social, demographic and political implications.
From the 1930s to the 1970s America had a middle-class economy centered in the heartland, feeding and supplying the world with machinery and goods while drawing labor from the impoverished south to the thriving midwest – an economy of powerful trade unions and world-dominant corporations. This has become a bicoastal economy dominated by globalized finance, insurance and high-end services on one coast, and by information technology, aerospace and entertainment on the other.
Finance and technology do not create many jobs, and the conduct of business in those sectors is rapacious and predatory, shading often into fraud. Some years ago we calculated the rise of income inequality measured between counties during the 1990s boom years, and found that half the increase was due to income gains in just five counties: Manhattan, Silicon Valley, Seattle. There have been other big gainers since, but the fact remains: the largest income and wealth gains in America have become highly concentrated in a
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