The ‘Century Of Misery’ We Will Confront On January 21
Shortly after the election of Donald Trump, Commentary magazine published what turned out to be its most-read piece of the past two decades: Our Miserable 21st Century. It was a scathing analysis of the catalysts for Trump’s election: the gilded age we’ve entered in which the wealthy are getting even further ahead, and the rest are struggling to stay in place. It applied an X-ray to U.S. economic indicators and showed how porous the myth of American prosperity has become since the turn of the century
The thesis of Nicholas Eberstadt’s widely read piece was succinct: “Our . . . 21st–century America has somehow managed to produce markedly more wealth for its wealth holders even as it provided markedly less work for its workers.” In some ways, it was an empirical confirmation of Thomas Piketty’s economic theories in his widely read book, Capital. Eberstadt pointed out that the year 2000 was an inflection point: the quality-of-life escalator came to a halt for most Americans in that year, freezing upward mobility ever since. (I would date this inflection point two decades earlier, but regardless, Eberstadt is accurate about our crisis, regardless of when it began.) From the dawn of the new millennium, wealth continued to increase dramatically for the privileged few while economic output, wages, employment, and social welfare either stalled or declined for the vast majority. Most of what was true in 2017 is still true today.
In his overview, this is what our unacknowledged misery looks like:
By 2017, American real estate assets were at all-time highs and rising in value. Financial markets were thriving. The Dow Jones Industrial Average was setting new record highs. Wealth was generating far more wealth on its own, untethered from the creation of new products or services. In other words, simply through financial tactics, the rich were getting richer.
As for the rest of the population, not so much. This financial bonanza is taking place against a backdrop of stalled productivity. Between 2008 and 2017, Gross Domestic Product hardly increased. Eberstadt wrote, “As of late 2016, per capita output was only 4 percent higher than in late 2007.” By contrast, between 1948 and 2000, GDP grew an average of almost 2.3 percent per year. If we had kept pace with that growth, the GDP of 2017 would have been 20 percent higher than it turned out to be.
Between 2000 and 2016, the labor force participation rate for Americans 20 and older plummeted. By 2017, that rate wasn’t even close to the rates from early 2000. For the two decades following the burst of the dot.com bubble in the late 90s, employment hardly increased, even though the population grew by 18%—partly because of setbacks from the financial crash of 2008. “As of late 2016,” wrote Eberstadt in his piece, “the rate was still at its lowest level in more than 30 years.” (This rate has grown over the past few years, but it has a lot of catching up to do.)
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The leading indicators led us to believe just the opposite. The official unemployment rate looked fabulous, dropping to record lows, but only because that measure purposely ignores the chronically unemployed, those who have quit looking for work. The actual unemployment rate is much, much larger. According to Eberstadt, “The unemployment rate tracks only joblessness for those still in the labor force; it takes no account of labor force dropouts. (At the time of this writing, for every (officially) unemployed American man between 25 and 55 years of age, there are another three who are neither working nor looking for work.”)
In the U.S. and the West in general, he points out, postwar labor markets exploded with growth for half a century, until the year 2000. Between 1985-2000, total paid hours of work increased by 35 percent nationwide. That was a dramatic growth in the national payroll. In the fifteen years after 2000, those hours increased by only 4 percent (again, while the population grew by 18 percent.) This indicator has also ticked up, regaining its 2008 level around 2016 and has been rising steadily since the publication of Eberstadt’s article.
All of this stagnation created a wave of despair. Eberstadt concludes by citing the quiet holocaust of drug overdoses among the disenfranchised and undereducated population left behind by our economy. He writes, “A short but electrifying 2015 paper by Anne Case and Nobel Economics Laureate Angus Deaton talked about a mortality trend that had gone almost unnoticed until then: rising death rates for middle-aged U.S. whites. By Case and Deaton’s reckoning, death rates rose somewhat slightly over the 1999–2013 period for all non-Hispanic white men and women 45–54 years of age—but they rose sharply for those with high-school degrees or less, and for this less-educated grouping most of the rise in death rates was accounted for by suicides, chronic liver cirrhosis, and poisonings (including drug overdoses).”
The author sums up: “Thus the bittersweet reality of life for real Americans in the early 21st century: Even though the American economy still remains the world’s unrivaled engine of wealth generation, those outside the bubble may have less of a shot at the American Dream than has been the case for decades, maybe generations—possibly even since the Great Depression.”
Here’s what Eberstadt doesn’t point out. This is a choice. We can begin to change all this tomorrow. The private sector can choose a smarter way to do business and revitalize all economic sectors. Yes, Eberstadt’s economic misery is one of the consequences of the global inequities in labor costs, with jobs migrating to developing nations like China, Vietnam and India. Yet most new jobs arise from growth in small to mid-sized businesses, which don’t outsource to Asia and most of which depend on consumption — buying power — to stay in business. Larger companies can make some sensible decisions that would expand the amount of disposable income for average households. They can do this by recognizing and focusing on the source of all value in a company: a creative, devoted employee.
Here’s what that means. There is a direct link between how a company views its labor force, how it treats those human beings, and how those human beings then pass along this devotion or disdain to customers. It’s a choice of one or the other: either you recognize and treat your workers as the creators of customer delight, or you see them as nothing but a cost to be diminished at every opportunity. The latter view has reigned for decades through the practice of maximizing short-term shareholder value. It results in a demotivated, unhappy workforce—people who have little interest in delighting customers because they work for a company that sees them as numbers on a balance sheet. It’s time to move on from this vision.
By recognizing the unique and indispensable value of a devoted, energized and creative work force, a company comes to understand the need to invest in its workers as a wellspring of future value. This is not an increase in costs. It’s an investment in a company’s future, in human capital, and it inspires happy workers motivated to find new solutions to customer problems, new ways to cement customer loyalty, and new products or services to expand a company’s markets. And if all companies adopted this vision, both productivity and employee income would soar, rebalancing the growth of capital with a new growth in productivity and wages. Our 21st century’s misery would then begin to lift. Some call this recognition of the centrality of employees and the new value of creative labor as one of the key principles of Stakeholder Capitalism. I call it common sense.