MIT Economist: US Has Regressed To A Third-World Nation For Most Of Its Citizens

A disturbing reality is emerging in the United States as the death knell has sounded for America’s middle class and the gap between rich and poor increasingly widens.

America is becoming two countries under one rule, where some citizens enjoy access to resources like education, good paying jobs, and financial comfort while others struggle to further their learning, work low-wage jobs, and live under burdensome debt.

Within these two vastly different countries, access to good and affordable healthcare is a given for some and a fairytale for others. In one sector, Americans influence policy, while in the other, Americans are merely acted upon by public officials.

These are the observations put forth by Peter Temin, Professor Emeritus of Economics at MIT, in his book The Vanishing Middle Class: Prejudice and Power in a Dual Economy.

The two sectors of America “entirely distinct financial systems, residential situations, and educational opportunities,” Temin says, and their interactions with the law vary greatly.

All of these factors point to the reality that the United States — the wealthiest nation in the world — is nurturing an economical and political structure more befitting a developing nation.

Temin employs the economic model developed by West Indian economist W. Arthur Lewis, notably “the only person of African descent to win a Nobel Prize in economics,” to assess the United States.

The Institute for New Economic Thinking summarized Lewis’ model, as it relates to America:

In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

In the U.S., the most likely way to move from the low-wage sector to the upper echelons of economic status is via education, but Temin notes that such a feat is far more difficult today.

The “FTE sector” — which Temin “named for finance, technology, and electronics, the industries which largely support its growth” — has made education more difficult to attain for many Americans, as the related expenditures have become more costly over time with the defunding of public schools and policies that increase student debt.

A good education begins in early childhood, Temin notes, and parents who cannot afford to spend the required time and resources on their children place those children at an automatic disadvantage, compared to those in the wealthy, FTE sector.

How did we get here?

Temin points to the 1970s, when worker productivity began to come untethered from wages. Corporate lobbying became more commonplace, the War on Poverty was replaced with the War on Drugs — which disproportionately affected the low-wage sector, and particularly African-Americans.

Politicians shifted from “turned from public-spirited universalism to free-market individualism,” Temin notes, and “leaders of the FTE sector became increasingly emboldened to ignore the needs of members of the low-wage sector, or even to actively work against them.”

How can we get out?

More domestic spending as opposed to military spending would go a long way to shoring up the dying middle class, Temin says.

The U.S. could also “restore and expand education, shifting resources from policies like mass incarceration to improving the human and social capital of all Americans,” as well as “upgrade infrastructure, forgive mortgage and educational debt in the low-wage sector, reject the notion that private entities should replace democratic government in directing society, and focus on embracing an integrated American population.”

And according to Temin, if such measures are not taken, even the wealthy in America could suffer:

“We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people.”

But the antidote, as prescribed by Temin, is likely a tough sell in today’s political climate.

Expanding education, updating infrastructure, forgiving mortgage and student loan debt, and overall working to boost social mobility for all Americans are bound to be seen as too liberal by many policy makers.

Until the course is changed, he warns, the middle class will continue to fade and America will remain unsustainably divided.

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