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Lesson of History: Learn

August 24, 2010

When I express dour skepticism on the state of the American economy, I am often forced to defend the position that we are in some exceptional, cycle-defying period of macroeconomics.  It’s a fair challenge.  When you’re on the bleeding edge, waters always seem uncharted, but any student of history can usually observe how universally history’s patterns are repeated.  After all, history is the sum total of the larger forces and wills that guide and control human action, and those forces and wills are generally immutable.  However, our institutions are being degraded in such a way that may fundamentally undermine the Hegelian cunning of reason’s ability to dig us out of our hole.

Specifically, the clearest supply-side economic lesson of the 20th Century came in a simple syllogism: the more educated the average worker, the more productive that worker will be, and the greater the demand and correspondent salary the worker can command.  “Education is the silver bullet,” in terms of economics, speech, culture, morality, civics, crime, and on and on and on.  And in the same way that Obama squandered the opportunity to publicly demand serious structural change in the energy sector post-Deepwater Horizon, Obama is in the process of squandering the opportunity to publicly demand serious structural change in the education sector in the face of a toxic economic environment (or at least appearing satisfied with a marginal set of changes).

If there is one great policy failure of this recession, it’s that we have not used the crisis to introduce structural reforms. For example, we have a gross mismatch of available skills and demonstrable needs. Businesses struggle to find the skills and talents that are needed to compete in this new world. Millions drawing the dole to sit around should be in training for the jobs of the future that require higher educational skills.

Given that nearly eight in 10 new jobs, according to the administration, will require work-force training or higher education, it furthermore makes no sense that we have reversed the traditional American policy of welcoming skilled immigrants and integrating them into our economy. Because of a recrudescent nativism, we send home thousands upon thousands of foreign students who have gotten masters and doctoral degrees in the hard sciences at American universities. These are people who create jobs, not displace them. The incorporation of immigrants used to be one of the core competencies of our economy. It’s time to return to that successful model.

There are increasingly telling statistics of the aberrant decline in the health of the American education and therefore workforce.  Our high school students are 21st in science, and 25th in math according to recent studies of 30 industrialized nations.  We have fallen from first to 12th in college graduation rates for young adults, for example.  And given that a college degree is a prerequisite for the jobs that constitute a middle class standard of living in the United States, it’s no surprise that the middle class is vanishing among significant segments of America.

That graph, courtesy of fellow Bloomingdale resident Matt Yglesias, amply demonstrates that unemployment simply isn’t at crisis levels amongst college graduates.  That makes perfect sense, given how many other countries have a comparative advantage at performing our non-professional jobs (and plenty of professional ones at that).  In the relatively unskilled labor department where Americans cannot ply dramatically larger productivity, they cannot compete abroad.  Chinese garment workers make approximately 86 cents per hour, and in Cambodia it’s 22 cents per hour; they gladly accept such wages because the costs of living in those countries are dramatically lower and filled with less miscellaneous crap (as well as dramatically less welfare, to be sure).  The simple truth that we are politically unwilling to acknowledge is that the bulk of the American workforce is being rendered obsolete and uncompetitively expensive, either by training, work ethic, environment, or otherwise.

Are there more “fun” illustrative statistics showing the downfall of the American, you ask?  Always!  Apart from your typical anti-capitalist bemoaning of the exponential spike in executives’ salaries compared to the salaries of their employees, there are some very troubling statistics that demonstrate the maladies likely to have second- and third-order effects on the long-term health of the economy.  For example,

Only the top 5% of households have earned enough additional income to match the rise in housing costs since 1975.

An analysis of income tax data by the Congressional Budget Office found that the top 1% of US households own nearly twice as much of America’s corporate wealth as they did just 15 years ago.

For the first time in US history, more than 40 million Americans are on food stamps, and the US Department of Agriculture projects that number will go up to 43 million Americans in 2011.

and my personal favorite:

The average federal worker now earns about twice as much as the average worker in the private sector.

It doesn’t take an economics professor to tell you that the private sector needs a kickstart if it is to remain the primary engine of economic growth in our society.  But it wouldn’t hurt if we had a few more people listening to those professors come to that conclusion.

UPDATE: If only the Bureau of Labor Statistics knew I was writing this post before it was published!  I could have given you the direct evidence that employees that get laid off are less productive (read: educated) than their rat-race-surviving counterparts.

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