Our New Gilded Age and What to Do About It

Guest post from Sean Bagniewski

2016 will mark the year that a reality star who likely doesn’t pay his income taxes won a minority vote to be the President of the United States. A far right comedian convicted of vehicular homicide unseated the prime minister of Italy in a constitutional referendum. Britain ended Winston Churchill’s dream of the “United States of Europe” with Brexit. A far right activist may win the French presidency. Another almost won the presidency in Austria.

After 70 postwar years of Western consensus on democracy and free market economics, people around the world are asking what on earth is going on. A coworker recently told me one of her friends voted for Donald Trump even though she hated him. “She was sick of it all and wanted to toss a wild dog into the room of the white collars.” Bingo.

 Beginning around the 1980’s, we started experiencing the most radical change in our workforce since the industrialization of the Gilded Age. People noticed the steam engine and the telephone, but they probably didn’t notice how productive and efficient we became. We send an email rather than wait for a letter. A company can digitize information that used to require teams of employees. Robot arms have taken the place of countless human arms in factories.

Think of the local news channel that used to have correspondents in Washington or hosts and producers for the weekend kids’ programs. Both are streamed in from a corporate headquarters now. Think of the local department stores. The upcharges on a sweater paid for professional salespeople and accountants and window display designers. The sweater can be bought on Amazon now. The display is sent in by a corporate office.

There’s no going back and we shouldn’t necessarily want to. The problem, though, is that like the Gilded Age, the vast majority of the savings from efficiency and automation have gone to the Rockefellers and the Vanderbilts of today. As OxFam recently reported, 80 people now own as much wealth as half the rest of the world. The middle class was hollowed out. Sweaters were cheaper, but the jobs displaced by their cheapness weren’t replaced. Outsourcing was part of it, but not as much as we think.

John Steinbeck supposedly said that all Americans see ourselves as temporarily displaced millionaires. Instead of blaming big businesses for not retraining their employees or the ultra rich for not paying their fair share of taxes, the far right conveniently blames the treaties and global elite of the European Union or the heartless bureaucrats in Washington. When things get uglier, they blame the others; the Mexican immigrants in America, the Middle Eastern refugees on both sides of the pond.

The byproduct of a free market is change, often painful change. Government is at its best when it provides the necessary balance to get people through that change. So what do we do? First, the ultra rich must pay their fair share for the government services like roads and waterways and defense that they benefit from. The Buffett Rule would mean billionaires like Donald Trump would be required to pay the same tax rate as their administrative assistants. It would result in tens of billions of dollars that could be reinvested in the American workforce annually. We also need to stop corporate shell companies and the use of offshore tax havens. American companies who do most of their business in America but pay their taxes to another country to take advantage of low or no tax rates isn’t very American. The same can be said for the wealthiest Americans who hoard their money in overseas accounts to avoid paying taxes.

There’s no desire to raise taxes or cut services, so that revenue is the only way to do the things both parties say they want to do. Like the New Deal, massive public infrastructure programs can be rocket fuel for the economy, but they cost money. Daycare tax credits and job retraining programs cost money. Education is the great equalizer of American society, but it too costs money. Trade schools like Central Campus in Des Moines cost money.

To be competitive, we also need to be open. America used to be the place where the best and brightest wanted to go and start a business. From the Scottish steel baron Andrew Carnegie to the Russian cofounder of Google, Sergey Brin, immigrants have started multibillion dollar businesses here. That patron saint of American capitalism, Steve Jobs, was the son of a Syrian immigrant. New businesses create more jobs and immigrants create more new businesses. Immigration is often the right thing to do, but it also makes us wealthier. A higher minimum wage would be immensely helpful too.

Can we do it all? Of course. We’re Americans. We will, though, have to brace ourselves for a political change that matches the economic changes we’ve seen for the last thirty plus years. The wild dogs won’t save us. Only we will.

by Sean Bagniewski
Posted 1/15/17