The Anxious Middle Class


We are living in strange times. We have vocal, angry extremists of one sort or another running for President and attracting fervent support from large segments of the population. The rise of angry politicians has always been a sign of economic woe. American prosperity springs from the middle, economically and politically--and as the middle class finds itself losing ground, the moderate and sensible political voices have a harder time cutting through the clamor.

All of this points to the way our economy has languished for more than a decade--much longer, if you see through statistical ups and downs of the past four decades. To regain our political bearings, on both right and left, we need to address the economic unrest that is finding a release valve in the noise of this political season. Robert Reich, the author of Saving Capitalism and former Secretary of Labor in the Clinton Administration, offered some good thoughts recently about the economy on NPR's Making Sen$e.

He said America's most productive majority has become the "anxious class." They worry that their paychecks will never be enough; they fear that their jobs will go away; and they know that they aren't getting ahead. In short, he says capitalism has to save itself by recognizing what's happening to that formerly silent majority (who are now seeking a voice in candidates like Donald Trump and Bernie Sanders.) All of this anger and fear devolves into finger pointing. Those who lean right point to government as the enemy. Those on the left point to Wall Street. Reich traces this divide back to former Supreme Court Justice Lewis Powell, who called on business to fight regulation and taxation. In short order, lobbyists appeared who were happy to do just that, and it's been us-against-them ever since.

We need CEOs to begin thinking the way Henry Ford did in the first decades of the 20th century. He lifted wages--in fact he chose to double them overnight--hoping to inspire a movement across the private sector. He knew that workers needed more money to simply keep him in business: if they could afford to drive the cars they built, the system would work. It was no more complicated than that.

That kind of thinking cuts through all the politics, and makes the work of the lobbyists beside the point. If employers simply realized that their workers are the source of all the value they produce--and also realized that human workers are infinitely more valuable than technological end-runs around the need for human labor (a tough choice these days)--our economy and our political scene would be entirely different. Free enterprise capitalism would start to work again for the benefit of most Americans.

The reality of the 21st century is that a creatively devoted workforce is the driver of a company's future. People at all levels of every company now need to be obsessed with the satisfaction of every individual customer. And they also need to be alert to how a company can improve the delivery of that satisfaction at every level. To eek every last penny of profit from an enterprise by paying people as little as possible is ultimately self-destructive. People lose heart, they lose interest, and then they lose the will to look for real-time solutions that will improve what a company does for the people it serves. And they also won't have money to spend at the end of the week, or month, or year--which is the kind of spending needed to grow the economy and generate new jobs.

Government can be the partner of business, not the enemy, but the private sector doesn't need to wait for help. It can bring about an economic revival all on its own. All it takes is for those who run companies to recognize the ultimate source of all value in the whole economic cycle: a happy, well-paid middle class worker. That's where our turnaround begins.

Some economists and politicians point to major tax hikes as the answer. Thomas Piketty suggested a dramatic wealth tax: he identified our economic quandary, but I disagree that taxes are the answer. History is replete with examples of the failures of a political redistribution of wealth: through revolution or higher taxes.

The real solution can be found in the way our system worked only half a century ago. That golden era of free market capitalism, from the end of WWII through the early 70s, created the most affluent and productive middle class in human history. Business needs to treat its employees the way the were treated then: and watch their creative devotion begin to grow the business from the bottom up.

Peter Georgescu is the author of The Constant Choice. He can be found at Good Reads.

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