Yes, this is a long post. But when you are trying to illustrate how a superpower can fall, it takes some few words.
In the last installment I discussed how the inevitable leveling of globalization started eroding the well-being of American workers, who had enjoyed an enviable advantage after WW2, due to a series of factors — most of which now have been reduced by globalization.
In this installment, we’ll see how the Republican party played both sides of America’s decline in the 2010’s: firstly, to lure disaffected American workers with promises of economic benefit while in reality, they sought (and succeeded) to line the pockets of the wealthy. Along the way, they helped destroy the concept of political civility which had unified the U.S. through many crises of the past and set the stage for a political disaaster.
A rising tide – but not for you: globalization’s pernicious effect on wages
The 1990s found Republicans and conservatives in general reeling from an unanticipated success by the Clinton administration: balanced budgets, falling crime rates, and economic growth. These factors weren’t all due to Clinton, who had his own problems in the personal sphere, but his leadership did well for the U.S. as a whole:
- no ruinous wars
- welfare reform
- reasonable taxation (highest marginal rate just 1/2 what it was under Carter)
- open trade (NAFTA had been signed by his predecessor, the Republican H.W. Bush)
Generally, Clinton was business-friendly. One act of Clinton’s signified his business-friendliness — and was the most fateful signing of a bill for the 21st century: the Gramm–Leach–Bliley Act, sponsored by three prominent Republicans, which set conditions for a financial crisis to threaten the entire global banking system. (That crisis would come in 2009). Nice job, there, Bill.
Clinton did benefit from a rise in productivity which had nothing to do with is leadership. It was during his time as President that big gains in productivity through automation brought huge windfalls to U.S. corporations — but not their workers:
This chart is from an excellent post by David Dayen about wage growth here, and is notable for two salient trends:
- Starting in the early 1980s, we start seeing a big payoff from computers aiding office (information technology), factory automation and engineering (CAD/CAM).
- Worker compensation benefited very little from the rise in productivity since 1977.