Global economy haunts American workers

Throughout much of President Obama's State of the Union address last night, I kept thinking back to the article I had just read in the current issue of The Atlantic, "The Rise of the Global Elite." Obama's talk of competitiveness and education and seizing opportunities sounded contrary to, or uninformed about, the dire warnings contained in Chrystia Freeland's disturbing article.

It's a long and complex article touching on many aspects of the modern world economy, but it boils down to this: Multiple trends are creating a vast gap between a relative handful of global plutocrats — men and women who owe little or no allegiance to any one nation or economic system and who are acquiring vast private wealth virtually unheard of in world history — and the rest of us, including particularly the American middle class. This tectonic shift in the economy preceded the Great Recession of the past couple of years, but the current mess of high unemployment, depressed consumer spending and soaring government debt is worsening and speeding up the long-term trend. All Americans, except for the minuscule number of global elites, will be negatively affected. In a real sense, these new elite are not Americans, nor are they Europeans or Asians. They are residents of the world, working in nations and cultures where the most opportunity arises. In recent decades, the biggest opportunities have been in developing nations, particularly India and China.

In a world of free trade, in which tariffs and import quotas are scorned and derided, the cards are stacked against American workers, who reigned supreme through most of the second half of the 20th century. But the new global economy has changed everything. Freeland quotes one anonymous global executive as saying American workers are accustomed to earning 50 times the wage rate of other workers (think Chinese and Indians), but the only way they can demand that sort of wage disparity today is to be 50 times more productive. That, of course, is not going to happen. New technology, transportation advances and trade policies make it feasible to transfer manufacturing anywhere in the world, and that means to the place where wages are lowest.

Without a doubt, the global revolution in technology and trade have had its benefits. I recently stumbled across the receipt for a television I bought in 1988. It was the first remote-control TV we owned. I paid $288 for a 19-inch TV (which I gave away to Habitat for Humanity a couple of years ago). For $288 today, I can buy a much larger, more sophisticated flat-screen television that makes my 1988 TV and its $288 price laughable. But the shrinking prices of consumer electronics and other products carry a large cost: Consumer electronics are not made in America by American workers making middle-class wages. Those jobs have disappeared, and the service jobs, government jobs and nonprofit jobs that have arisen to fill the gaps cannot sustain an economy.

The global economy, pressed by the new global elite, is pushing down American wages, eliminating American jobs and, in the long term, forcing a fundamental readjustment of American standards of living. One day this recession (which is officially over) will end, but the American economy will not be the same. Unless the president and Congress find a way to change the rules of global trade and economics, American workers will see their lifestyles gradually and inevitably decline, no matter how much we invest in education and competitivenes.