Booming businesses, weakened workers

August 20, 2010

I appeared on PBS’s Nightly Business Report yesterday to talk about a serious fault line that’s running through the U.S. economy: businesses have figured out how to thrive in a global economy while workers have been left behind. Unless American businesses can find a way to include the sagging middle class in their success, they will soon face a populist backlash which will make Barack Obama look like Milton Friedman. Below is the video and my full remarks:

Watch the full episode. See more Nightly Business Report.

My full remarks:

Here’s the good news about China’s emergence as the world’s second largest economy — U.S. business has figured it out. And here’s the bad news– while U.S. companies can go global, most U.S. citizens can’t. The result in this age of globalization, is a growing tension between the interests of America’s business leaders and the interests of much of its middle class. Indeed, the most important fault line in American politics today may not be between Democrats and Republicans. It is between those businesses and business people who are succeeding in the global economy and those who aren’t.

This clash of values and interests upends our usual ideas of left and right. Consider immigrants. It’s no accident that Mike Bloomberg and Silicon Valley bosses are squarely on the side of diversity and liberal immigration laws. But CEO’s are less thrilled about the Democrat-driven imposition of more regulation and the promise of higher taxes.

The irony is that the globalization of American business is surely a good thing. Imagine how much worse things would be if U.S. companies hadn’t figured out how to play and win on the world stage.

But the equally important truth is that the twin revolutions of globalization and technological change are disproportionately benefiting the global super-class and the middle class in emerging markets like China and India — while leaving much of America behind. America’s business leaders need to figure out how to help America’s middle class join the global economic party or face a populist backlash which will make Barack Obama look like Milton Friedman.


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[…] Chrystia Freeland of Reuters interviewed yesterday on PBS: “Here’s the good news about China’s emergence as the world’s second largest economy — U.S. business has figured it out. And here’s the bad news– while U.S. companies can go global, most U.S. citizens can’t. The result in this age of globalization, is a growing tension between the interests of America’s business leaders and the interests of much of its middle class. Indeed, the most important fault line in American politics today may not be between Democrats and Republicans. It is between those businesses and business people who are succeeding in the global economy and those who aren’t. […]

Posted by The American Middle Class | Report as abusive

“Unless American businesses can find a way to include the sagging middle class in their success, they will soon face a populist backlash which will make Barack Obama look like Milton Friedman.”

I hope that’s the case, but am discouraged at how easily the public’s attention can be distracted by irrational “hot flashes” like Arizona border politics and the misnomer “Ground Zero Mosque.”

Studs Terkel wrote about worker attitudes toward their own unemployment during the Great Depression. He found people tended to blame themselves, not the government, for their troubles.

Posted by JohnF500 | Report as abusive

We should not blame the government for this recession as well. It is the fault of the super class that controls this plutocracy. They caused the first great depression and they are behind this recession as well. All they have to do is collectively decide to sell all/most of their stock and then bang, the market crashes. It is lovely how corporate and banking lobbyists fought for de-regulated markets so that everyone could play the same game that Enron was running back in the 90’s. It is lovely that CEO’s salaries multiplyed by 400% whilst the average workers wages stagnated and in a lot of cases were dialled back for the good of the company.
It is also the fault of all the corporations that moved their job bases overseas for low labor costs and no accountability. Perhaps if America begain manufacturing a sustainable way of life and tryed to sell that to the world instead of toxic assets we could come back out on top. We could be the leaders in a green technology revolution but instead we are clinging to a way of life that is unsustainable and deadly to the majority of the plants and animals on the the planet, including us.

Posted by shameOnCorps | Report as abusive

The American Middle Class is also known by the name “American Consumer”, or the engine responsible for some 70% of the US economic activity, and thereby of the rise (and potential fall) of China’s export-driven economy.

The world is small, flat, and much more interconnected than one would have imagined only a few years ago…
That is to say that the American Middle Class is a powerful player not only on the domestic scene, but on the International one as well.

Posted by yr2009 | Report as abusive

It’s confusing to say the least. Misleading definitely. American companies figured it out alright. They became global. That means 1 – they had to dump american employees and 2 – that by becoming global, e.g. no longer ‘American’, they are changing their very identity.

Unfortunately, as implied by this article, middle class Americans cannot follow the same path as American business because by definition, we are citizens of the United States, we are not citizens of the world. We cannot go ‘global’. We are not marketable in India, China, Germany, or any other country. In other words, although capitalism has been protected by peoples of the Americas, and has thrived on our shores, the private sector has no loyalty. It is showing its dirty side to a sponsor country and continent. Finally, there is once again a clear delineation between capitalism and democracy. Although we have been viewing them as ‘married’ for decades, they are distinctly separate. Capitalism will lead to the erosion of all governments. All, including China, the U.S., and the new E.U. The private sector will be our new master.

Posted by SeaWa | Report as abusive

We should blame the government for this recession as well, they are the ones that past the legislation for the corporations to outsource the jobs. The Ceos are another piece of work they are stuffing their own pockets with the pension moneys they stole from the workers as well as from the pay cuts and work rule changes they have forced down the American workers throats.
shameOnCorps above is totally correct and it will only be when people realize that his statements are correct the US will dig itself out of the grave it dug for the workers. You can’t have an economy with out the middle class, Rich and poor will not work.

Posted by lookatyou | Report as abusive

The US standard of living has driopped from one of the highest in 1980 to below 10 th in the industrialized per reports to Congress. Its been that way for a couple of decades. Reaganism and globalism and federalism and and supply side economics has caused the decline and decay ! Decades of abuse that are colliding with reality of insufficient tax base, corruption , and fqailed national economic policy designed to make too big too fail replace countries gpd, regional and ultimately one world government like “Rollerball” with James Caan, leading to “Shattered Dreams”. The only economy Congress can plan is their own checkbook !

Posted by HelloWalls | Report as abusive

For decades progressive taxes have been cut wile taxes on the poor and middle income hqave skyrocketed on the poor and middle income in the form of sales taxes and property taxes as well as sin taxes!

The flat tax, national sales tax, value added tax proposed at 15% will only make matters worse.

Historically new products were priced for the rich and as capacity grew prices declined to middle income and low income which have been diminsihing and thus reducing demand for manufactiured good owned by Americans!

This same thing reduces the stability and life cycle for American made goods, economy, and tax base !

Posted by HelloWalls | Report as abusive

The aristocracy knows they have a problem on their hands. There is a reason so many are pledging to donate a good portion of their money. They know they have stolen too much out of the economy and that the scale has tilted too much in their favor. This is their last ditch effort to stop a populist uprising (at the polls or in the streets). This is the same thing the robber barons did before it all came crashing down. People like Carnegie were donating like crazy trying to make their obscene wealth seem like a virtue. The rich are only rich because the rest of us let them. When they keep more than they are worth, like in our time, it can only lead to the majority taking back that wealth through taxation or conflict.

Posted by anarcurt | Report as abusive

[…] Just saw this, by the way…looks like the middle class is in the news. […]

Posted by Digital Industrial Park » All Eyes on the Middle. | Report as abusive

Americans BREATHE. And corporations do not, whatever the Supreme Court says.

The Government belongs to Americans. If corporations do not benefit our society as a whole, they will be either heavily burdened or expelled from America, including American markets.

So the real decision for business leaders is how to answer the question, “Does my company want to operate in the USA?”.

Posted by txgadfly | Report as abusive

The problem is not entirely in the hands of corporate america as the external value of the currency remains the province of the government. China does not have a secret formula by which it is able to achieve rapid growth rates. A devaluation of the dollar would very quickly bring US companies back home and make Chinese goods to expensive. Unfortunately the effect may not last ( competitive devaluations etc) but I think it does show that the economic and politcal equation is not that straight forward

Posted by osymandius | Report as abusive

Hey, the big corporations and the money people will just move to whereever offers the best deal. They have been tossing bones to the politicians and getting people elected who they can control for years. It is a bit too late to turn around now. The Government is in deep waste material and they will reap the crop they have sown. Nancy and Harry can’t even clean their houses, so how can we expect them to fix the economy.

Posted by fred5407 | Report as abusive

It would not be surprsing for a new American middle class poor to boycott those who export jobs to make money taking their last paychecks. Thrift as a weapon; saving as a nuke. The original Boston Tea Party started by not buying tea…

FWIW, this works just as well to starve government; what people don’t make, it can’t tax.

Posted by RET_SFC | Report as abusive

Corporate boards are barely accountable to shareholders. Today because of diversification in mutual/hedge funds the American people typically do not own shares of stock. I do not think M/H funds exercise their rights of ownership on behalf of investors. C Suite execs are continually approved for higher and higher salaries to stay “competitive” with other CEO’s while extracting shareholder value. We need to bring back accountability to this system that was meant by the Investment Act of 1940. I don’t think this will solve all the current problems but I do think it is something that should be addressed so that shares are no longer like casino chips.

Posted by ericcar | Report as abusive

The problem is that the American dollar has not fallen in value relative to other currencies, making American labor cheaper. It use to be that the world was in love with the American dollar. Now it seems that much of the world is in love with American debt(Federal debt for the sake of safety), which has also helped to keep the dollar high. It seems like an Alice in Wonderland world of finance right now – upside down that people seek to invest in one of the world’s largest debtors, both in terms of federal debt and trade debt. It is a testement to the world of finance’s belief in America. But American workers are suffering.

Posted by 123456951 | Report as abusive

The Government in the US with its’ up and down cycle of managing the economy around elections has also chased our businesses to a global market. We are being left behind with an up and down economy, staggering debt, and an antiquated system of Government. The next to go to foreign countries will be our brightest minds. Our Government does not need a change, it needs an overhaul, or we can take our place with Britain as a third rate nation.

Posted by fred5407 | Report as abusive

Or maybe we can just have a revolution. What is going on in America right now looks strikingly similar to pre-revolutionary France or Late-Tzarist Russia. The super class is raping and pillageing the US economically. However, the police/military are ill-prepared for the suppression that will be necessary to hold our millions down. Also, we are (the american people) extremely heavily armed. Frankly it is a flashpot waiting to go off.

Posted by murfster | Report as abusive

[…] more >> […]

Posted by Booming businesses, weakened workers | Current Social | Report as abusive

Once again we indulge ourselves in the ultimate hipocraisy. Blame everyone in sight, particularly the ‘other political part” and big business. But most importantly, take no responsibility ourselves.

As consumers we want everything to be ultra-convenient and cheap. For example, to remain a competitive, Walmart strongly encouraged it’s suppliers to move production to China. The government did not set the tone for this drastic measure…, production costs and the need to constantly reduce those costs made the move necessary and inevitable. Do you shop at Walmart?

While John Kerry was blasting George Bush for “sending American jobs overseas” his wife’s company, Heinz, was, at that very moment, sending jobs from the northeast to Mexico. No one in the government required or encouraged Heinz to make that move. The need to reduce production costs and remain competitive forced the move.

This scenario has played out hundreds of times all across America. I’m reasonably certain senior management at Heinz was not anxious to move jobs out of the US. The alternative was to lose business on price and eventually go out of business entirely. In that case, all of those employed by Heinz would lose their job.

If you are a union employee and demanded higher and higher wages and benefits you were and are a part of the problem. If you demand lower prices for goods and services you are part of the problem. We all are. Look in the mirror.

Posted by Roadwarrior50 | Report as abusive

Another elitist writer hits the news stands…
What Ms. Freeland fails to acknowledge is that it was American business who not only went global, they are primarily the ones who helped China ’emerge’…. not the other way around as implied in the article…..

Posted by edgyinchina | Report as abusive

Henry Ford figured out that he needed to raise wages in order to sell the cars he made to the general public. This was the beginning of the demand/pull type economy that America was built on. Sam Walton figured out that if he found enough low wage employees, he could sell products a lot cheaper than most small retailers so the low wage folks would have to shop at Walmart in order to stay even. Lower wages began a downward spiral so that people who worked there (Walmart) could only afford to shop there. Now that the big box stores have taken over, the general public is completely at their mercy. Nice Work!

Posted by Bozoshoes | Report as abusive

If you have a full time job with a decent company, you are upper clase

Posted by STORYBURNthere | Report as abusive

Regardless of your politics, this was started back in 1960’s with Nixon’s visit to China and later getting favored nation trade status with the US(a complete slap in the face to the thousands that died in the Korean war with proxy China). How could we give that kind of status to a communist country. Heck over 58,000 died in Vietnam and look at it now. It’s one of the top US tourist spots in the world. The super class that owns all the central banks across the world were responsible for this great recession just like they were for the Great Depression. Yet we continue to vote in the same 2 parties who are in bed with these people.

Posted by billyray1976 | Report as abusive

The whole system needs a systemic overhaul, starting with the college education system, and in particular business education/philosophy. It is the ed. system that teaches/influences students, who become leaders, to focus on designing strategies and making decisions to maximize profit. This is not at all well-balanced, but still, it permeates throughout all other sectors, e.g. legal and medical. It is the basic philosophy used by the GOP to build the system during the industrialization era and is the default system that is still being pushed today despite that the playing field is rapidly changing. Until this changes, or a better balance is obtained, or something extraordinary happens/employed, nothing else will, and the old model will be perpetuated with “duct tape” fixes until it completely fails.

Posted by ghj111 | Report as abusive

When you get to the top there’s no way to go but down. America’s rise to No 1 in the world after World War 2 is based on conditions that can never again be repeated. The foreign competition (Germany, Russia, Japan) was destroyed during the war. The US had all the essentials to succeed: a stable political system, a population sick of warand eager to work very hard, a functioning industrial base that wasn’t bombed into oblivion and a huge landmass that provided virtually every natural resource in abundant quantity that a modern growing economy needs: vast petroleum reserves, all kinds of mines, fresh water and cheap land.

While the 20th century belonged to America, the 21st century will belong to China and Asia. Their populations never had mass prosperity, and therefore they will work much harder and for far lower wages than Westerners. It’s brute economics, capitalism, call it what you want, love it or hate it, but it’s there. And it will drive the Asian developement in the future the same way it drove American development in the past.

Posted by Anthonykovic | Report as abusive

Yep keep blaming the corporations. The corporations pay for half of the taxes in this country. Do not actually look at the overspending government that has failed the middle class and is putting a stranglehold on corporations now. Do not look at the government that turned nanny and supports illegals financially and props them up for future votes while selling out the Country. Blame the banks for being smart enough to protect themselves from people that do not pay their loans back. Quite a few of you people are in denial and have a backwards point of view of what is really happening. The government is becoming is the problem the Demofats have spent us in to oblivion but make sure you do not recognize the obvious. Blame the corporations that are leaving this country in droves due to our politicians.

Posted by Lanche | Report as abusive

LIke Halliburton, for example.

Posted by breezinthru | Report as abusive

You can blame this economy on the stupidity of the AMerican voter for many reasons. So many I can’t list in this little box that no one will probably read anyway.
People are in business to make money and labor has always been the problem. It started back when the South had slaves and we know how that turned out. We can thank the last 30 years of profit to the Mexican workers which worked hard for much less than the Union Worker.
Middle class jobs, where did they go? Overseas, why? Because to compete in the global economy which Bill Clinton so happily kicked off, American companies have to have cheap labor like their competitors. In the US they were paying laborers to much because of Unions. Manufacturers closed down because they could get the same part from China for half what it costs them in the US and not deal with the labor Unions.
You all speak of the rich causing the great depression? You are right but today it is the Federal Government that is the rich one trying to control everyone. American companies control very little compared to the few during the great depression. The government tells you they will help, they raise taxes to help you .. well that raising of taxes also trickles down to you and me. They don’t take that from their pockets, they pass it on to the consumer. That is called overhead for you non-educated peers of mine. Half of all companies overhead is taxes … those taxes that are being raised to help you is actually hurting you more than you know or realize. The disturbing thing about it you keep voting for the same people that say they will help you and at the same time are robbing all of us blind of our jobs and money without any responsibilty … just kills me.

Posted by Bybee | Report as abusive

The world need’s a revoloution …one world with one currency…thats why banks and traders hate the Euro they dont wont the Eropean model to spread (European union is about people not companies)

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