This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
On both sides of the Atlantic, there is growing sentiment about an economic system widely perceived as unfair and where blame is directed at immigration, globalization and international agreements that allegedly give other countries economic advantages.
This has fostered the rise of political candidates who rebel against the existing political order, advocate retreat from globalism and stoke the flames of xenophobia and nationalism. History tells us that ignoring these underlying sentiments not only puts mainstream politicians and elites at risk, but it also jeopardizes the institutions that secure democracy and the economic well-being of the people.
Today's economic nationalism and mercantilist thinking echoes the policies of the 1930s, when a worldwide depression led to a retreat from international engagements, increased protection of domestic markets and a contraction of international trade. Unfortunately, those policies reduced global demand and prolonged a very deep depression.
Economic nationalism is fueled by growing dissatisfaction of lower-skilled, less-educated workers, who have watched globalization and technological change lead to at best stagnate wages and reduced real incomes or, worse still, the disappearance of higher-paying working-class jobs. In the U.S., real wage gains since 1980 have been negative or negligible for the lowest 50 percent of wage earners, meager at best for the next 49 percent, and generous for only the top 1 percent. Income and wealth inequality, which has been widening since the 1970s, has reached a level not experienced since the 1920s, just prior to the Great Depression.
International trade, the free flow of capital and labor and technological change all impose structural adjustments on an economy. These adjustments generally result in two possible outcomes. First, they increase economic efficiency by reallocating resources to more efficient/cost effective sectors of the economy where employment, wages and profits increase — this is the winning sector. Second, other sectors face structural dislocations caused by international competition or technology induced obsolescence. This in turn reduces employment, wages and profits — making this the losing sector. The outcome of these adjustments widens the gap of income and wealth inequality across the economy.
The perception of unfairness has produced feelings of resentment intermixed with passions of fear and anger. This is the essence of the Brexit crusade and the Trump movement. The economic losers have said this is enough, and they recognize an opportunity to protect their interests by political means. Brexit may only be the beginning of a contagion that spreads through the remaining EU. In Europe, the socialist left and nationalist right are enjoying surges in popularity. In the U.S., 25 million Americans voted for Donald Trump or Bernie Sanders, two candidates whose messages resonate with angry voters.
It's time for the economic winners to respond with solutions to the concerns of angry voters by implementing a "worker agenda." This agenda is in everyone's interest. Why? Because a democratically driven rebellion against the policies and institutions that promote economic growth, efficiency, and global cooperation is gaining ground. If the economic winners ignore these cries of protest from angry voters, they risk losing the political consensus that undergirds an economic system that benefits them the most. This attack focuses on changing the distribution between the winners and the losers, and views their abandonment by government as a cause for political upheaval.
Who has the most to lose by electing demagogues who preach policies of the 17th and 18th centuries? Everyone will lose, but especially those who have gained the most during this long period of structural neglect. What does a "worker agenda" look like? It's a commitment to creating opportunity and prosperity for all. It recognizes that prosperity at the top depends on the economic viability and sustainability of those below.
How do the winners compensate the losers? By promoting educational opportunities that enable displaced workers to access skills required by the re-structured economy; expanding access to vocational education for young people who choose not to go to college; encouraging companies to engage in more profit-sharing; increasing the minimum wage; and finally lowering taxes and subsidize investments of business that increase productivity.
Globalization and technological change are impactful and irreversible. For too long we have ignored the structural adjustments they produce. It's time to respond, or risk losing many of the benefits a market system so adequately provides.
James "Cid" Seidelman is distinguished service professor of economics and former provost at Westminster College.