An article appeared recently in the Boston Globe that raised unsettling questions about the direction of the American economy and what passes for conventional economic wisdom among many pundits, politicians and corporate spokesmen. In an op ed column, ("A lesson for America") Harvard University economist, Edward L. Glaesar, observed that "Only 58.3 per cent of adults have jobs.." and that "America's unemployment teaches a stark lesson about the value of education. Almost three quarters of adults with college degrees have jobs; fewer than 40 per cent of high school dropouts work" Professor Glaeser's solution: make education a priority. Left unanswered is the question whether, given his acknowledgment that one quarter of Americans with college degrees are also without jobs, education alone is likely to generate a significant economic recovery.
Long before the effects of the great recession begin to manifests themselves in 2008, the shedding of jobs in the American manufacturing sector and increasing corporate "downsizing" contributed to the problem of growing structural unemployment. As a result, the number of men between the ages of twenty-five to sixty-four who were available for work, but were no longer employed, increased during the past generation. Research shows that, between 1975 and 2002, the real earnings of males with only a high school education decreased by 13 percent while the earnings of high school dropouts decreased by 23 percent. Further, in 2008, 28 percent of black men of working age reported that they were unable to find work. But the largest decline in labor force participation occurred among workers who possessed either a bachelor's degree or a graduate-level degree. Hence, the argument that better education is the key to economic advancement has been disproved by the data.
Yale University Political Scientist Jacob Hacker, in his important book The Great Risk Shift (Oxford University Press, 2006), quotes the advice given by two business commentators "Be willing to retrain. The average weekly wage for a computer programmer is $23.01. A typical textile worker makes only $8.25. What's more, the number of computer jobs is rising, while the opportunities in textiles are diminishing. Jobs come and go as the economy evolves, often benefitting those workers who learn new skills and keep up with economic changes." Despite this advice, as Hacker notes, between 2000 and 2004, more than 180,000 jobs--about a quarter of the total employment of computer IT and programming professionals--were lost. By early 2004, unemployment among computer programmers approached 10 percent. Hacker further notes that more than 91 percent of the programmers employed in the United States possessed college degrees and that, to add insult to injury, many of the programmers, in order to receive severance pay as part of their lay-offs, were required to train their replacements from India and elsewhere.
Although the idea of an industrial policy strikes a discordant note in this intensely individualistic culture, where any kind of public planning is often derided as socialism, the aversion to an industrial policy has ominous implications. Between December 2008 and July 2009, according the United States Department of Labor, manufacturing jobs in United States jobs declined by 47 percent. Simultaneously, the value of China's exports to the United States--mostly of manufactured products--increased to a record $337 billion in 2008. The consequence of this laissez-faire attitude has been the de-industrialization of the United States and the systematic impoverishment of American workers.
The absence of a coherent industrial policy has remained largely unremarked upon by the pundits and political class, while the fragmented power centers of this country's federal government have not hesitated to endorse policies that enable businesses to outsource, the wealthy to buy trophy homes and stash money in offshore accounts, and agri-businesses to swallow up small family farms while receiving massive taxpayer subsidies. The political and economic policies pursued during the last three decades of the twentieth century and the first ten years of the twenty-first century neglected and de-funded public goods and infrastructure from railroads to bridges, to economic training programs for the unemployed, to educational grants and programs to improve the quality of education and to increase the number of university graduates.
Whether the Obama administration will be willing to squander political capital in an effort to address this problem in a serious way remains problematic, given its caution and the financial and political power of entrenched interests and their lobbyists. In addition, the limitations of a federal government in which power is divided and exercised by so many disparate power centers militates against the likelihood of success in any such endeavor. By contrast, the European Union countries have no such aversion to thinking and planning on the macro-economic level. The member states, despite the effects of the recession that they, too, are experiencing, have announced ambitious plans to develop a hydrogen-based economy by 2050, and the union has invested billions of dollars in the development and improvement of infrastructure educational programs and scientific and technological research and development.
Nevertheless, the mantra that the development of a "knowledge-based" economy is the solution to America's economic woes is nonsensical. Individual educational attainments, by themselves, will not overcome the structural problems present in the American economy. The growth of the service sector of the economy, without an industrial base of well-paid workers to support it, will ultimately reduce the wages of everyone, including highly paid professionals. Before we jump embrace this model we need to reflect upon the last model of a "knowledge-based " economy in the Western world - the Middle Ages. Although clergy were exempt from criminal prosecution, few would argue that their profession was highly-paid.
The failure of the market economy to improve the standard of living for the vast majority of American workers and their families, despite huge tax reductions, enormous business subsidies and de-regulation during the last four decades, belies the argument that more of the same will be better. There is simply no substitute for coherent economic planning by the federal government to promote the creation of well-paying jobs; to reverse the continued de-industrialization of America through investment in public goods and infrastructure; coherent tax policies, enforcement of fair trade policies; and the adoption of labor laws that enable Americans, without fear of reprisals, to join unions, and to bargain effectively. The goal must be not to reduce American workers to the level of Chinese or Indian workers but to maximize economic growth and to reduce economic inequality.
Long before the effects of the great recession begin to manifests themselves in 2008, the shedding of jobs in the American manufacturing sector and increasing corporate "downsizing" contributed to the problem of growing structural unemployment. As a result, the number of men between the ages of twenty-five to sixty-four who were available for work, but were no longer employed, increased during the past generation. Research shows that, between 1975 and 2002, the real earnings of males with only a high school education decreased by 13 percent while the earnings of high school dropouts decreased by 23 percent. Further, in 2008, 28 percent of black men of working age reported that they were unable to find work. But the largest decline in labor force participation occurred among workers who possessed either a bachelor's degree or a graduate-level degree. Hence, the argument that better education is the key to economic advancement has been disproved by the data.
Yale University Political Scientist Jacob Hacker, in his important book The Great Risk Shift (Oxford University Press, 2006), quotes the advice given by two business commentators "Be willing to retrain. The average weekly wage for a computer programmer is $23.01. A typical textile worker makes only $8.25. What's more, the number of computer jobs is rising, while the opportunities in textiles are diminishing. Jobs come and go as the economy evolves, often benefitting those workers who learn new skills and keep up with economic changes." Despite this advice, as Hacker notes, between 2000 and 2004, more than 180,000 jobs--about a quarter of the total employment of computer IT and programming professionals--were lost. By early 2004, unemployment among computer programmers approached 10 percent. Hacker further notes that more than 91 percent of the programmers employed in the United States possessed college degrees and that, to add insult to injury, many of the programmers, in order to receive severance pay as part of their lay-offs, were required to train their replacements from India and elsewhere.
Although the idea of an industrial policy strikes a discordant note in this intensely individualistic culture, where any kind of public planning is often derided as socialism, the aversion to an industrial policy has ominous implications. Between December 2008 and July 2009, according the United States Department of Labor, manufacturing jobs in United States jobs declined by 47 percent. Simultaneously, the value of China's exports to the United States--mostly of manufactured products--increased to a record $337 billion in 2008. The consequence of this laissez-faire attitude has been the de-industrialization of the United States and the systematic impoverishment of American workers.
The absence of a coherent industrial policy has remained largely unremarked upon by the pundits and political class, while the fragmented power centers of this country's federal government have not hesitated to endorse policies that enable businesses to outsource, the wealthy to buy trophy homes and stash money in offshore accounts, and agri-businesses to swallow up small family farms while receiving massive taxpayer subsidies. The political and economic policies pursued during the last three decades of the twentieth century and the first ten years of the twenty-first century neglected and de-funded public goods and infrastructure from railroads to bridges, to economic training programs for the unemployed, to educational grants and programs to improve the quality of education and to increase the number of university graduates.
Whether the Obama administration will be willing to squander political capital in an effort to address this problem in a serious way remains problematic, given its caution and the financial and political power of entrenched interests and their lobbyists. In addition, the limitations of a federal government in which power is divided and exercised by so many disparate power centers militates against the likelihood of success in any such endeavor. By contrast, the European Union countries have no such aversion to thinking and planning on the macro-economic level. The member states, despite the effects of the recession that they, too, are experiencing, have announced ambitious plans to develop a hydrogen-based economy by 2050, and the union has invested billions of dollars in the development and improvement of infrastructure educational programs and scientific and technological research and development.
Nevertheless, the mantra that the development of a "knowledge-based" economy is the solution to America's economic woes is nonsensical. Individual educational attainments, by themselves, will not overcome the structural problems present in the American economy. The growth of the service sector of the economy, without an industrial base of well-paid workers to support it, will ultimately reduce the wages of everyone, including highly paid professionals. Before we jump embrace this model we need to reflect upon the last model of a "knowledge-based " economy in the Western world - the Middle Ages. Although clergy were exempt from criminal prosecution, few would argue that their profession was highly-paid.
The failure of the market economy to improve the standard of living for the vast majority of American workers and their families, despite huge tax reductions, enormous business subsidies and de-regulation during the last four decades, belies the argument that more of the same will be better. There is simply no substitute for coherent economic planning by the federal government to promote the creation of well-paying jobs; to reverse the continued de-industrialization of America through investment in public goods and infrastructure; coherent tax policies, enforcement of fair trade policies; and the adoption of labor laws that enable Americans, without fear of reprisals, to join unions, and to bargain effectively. The goal must be not to reduce American workers to the level of Chinese or Indian workers but to maximize economic growth and to reduce economic inequality.