Page 2 of
2 THE BEAR'S
LAIR America's
disappearing middle class By
Martin Hutchinson
remember who
votes for them. In the US currently, the question
is bedeviled by accusations of racism which,
whether or not valid, in some cases are used
illegitimately to obscure the unquestionable
economic rationale for voter resistance to
immigration.
Finally, and most relevant to
the increased post-2000 inequality, which has been
of a different type to that of 1973-95, there is the
interest rate policy of the
Federal Reserve, which since 1995 has been
persistently far too loose. This has allowed the
benefits of the deflation that has naturally
occurred due to the Internet to flow not to the
living standards of the average US worker, but to
asset values, concentrated at the top end of the
income scale and the boom in which has provided
jobs largely for the upper middle class.
The lack of an adequate process of
“creative destruction” on Wall Street has allowed
housing finance, for example, to be routed through
a securitization mechanism that provides ample
livings for Wall Street and the hyper-energized
salesmen known as mortgage bankers, but has
actually increased the relative cost of home
mortgages to the consumer compared to the old
savings and loans.
The standard centrist
and conservative response to inequality, that
increased investment in education will solve the
problem, is mostly tosh. A substantial percentage
of the workforce, while perfectly capable of
supporting themselves, are wholly unable to
benefit from higher education at a sophisticated
level, while “community college” higher education
often provides them with skills that are
marketable for a few years at best. Thus,
increased investment in education is likely to
have little effect at the lower end, beyond
perhaps a few rare cases of successful
remediation, while delaying inordinately the entry
of those with high-end skills into the workforce.
There is however a need for investment in
mid-career education, as well as in adjustment of
those mechanisms of finance and social cohesion
that make it difficult for people to retrain in
midlife. Most degrees obtained at 21-25 are of
little use at 50, and will be even less use in
late career if working life-spans are extended to
70 or beyond, as seems inevitable they must be. If
the new globalization prevents the stability that
the US employees of large companies used to enjoy,
then mortgage companies, tax authorities, school
districts and credit card companies will have to
get used to gaps in payment, bearing some of the
costs of that instability, as workers retrain
themselves for the exciting new world of their
second career.
A second essential is to
reduce the pace of change, not of cutting-edge
technological change, which in any case occurs
relatively slowly most of the time, but of
Schumpeteran “creative destruction” which destroys
jobs and, more important, destroys the employee
security brought by decades of experience in a
particular function. In general, low interest
rates accelerate destruction, as does a labor
market open to immigrants from countries with much
lower wage levels. A world in which money is
tight, new projects are undertaken only when they
clearly provide a clearly superior avenue to
reward and labor is secure against competition
based solely on price, is a world in which careers
can be built, seniority attained and workers at 55
can feel relatively secure that they will not be
thrown onto the industrial scrapheap. There is no
need whatever for additional government spending
to achieve this; it simply requires tight control
of the money supply and immigration.
Protectionism itself is not the answer.
For one thing, as US and EU agriculture subsidies
have amply demonstrated, it merely enables the
lobbying rich to entrench themselves still further
from their less affluent countrymen. Free trade
provides a useful spur to competitive effort; at
the same time its effect differs from that of free
migration, because much of the economy is not
readily transportable around the globe. Retailing,
hotel and resort services, personal services,
domestic transportation and construction are all
substantial areas of the economy that require
mostly labor of modest skill and, if protected
from foreign immigration, are little if at all
threatened by free trade. If labor in those
sectors is allowed to attain a respectable degree
of bargaining power, it will raise wages not only
in those sectors but in the rest of the economy as
well, allowing only the most overpriced operations
to lose out to foreign competition.
A
world of tight money, tight immigration controls
and greater stability is unattractive to Wall
Street, if only because it will tend to reduce the
share of corporate profits in gross domestic
product and the opportunities for creative (albeit
in the long run destructive) financial juggling.
However corporate profits and the stock market are
not an end in themselves, they are only a means to
an end, by which investment is adequately
remunerated and labor is permitted to improve its
living standards over time with adequate
protection from excessive turnover.
A
world in which few if any have security in their
livelihood is not conservative, it is anarchist.
It is also deeply repugnant to the average voter.
That will ensure that, if the noise and struggle
of the free market is allowed to become too
destructive, it will be replaced by the eternal
silence of the socialist tomb.
Martin Hutchinson is the author
of Great Conservatives (Academica Press,
2005) - details can be found at
www.greatconservatives.com.
(Republished with permission from PrudentBear.com.
Copyright 2005-07 David W Tice &
Associates.)
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