Chrystia Freeland

Mitt Romney’s thumping victory in the Florida primary this week is bringing us closer to a Romney-Obama face-off in the autumn. While we do not know for sure if Romney will clinch the Republican nomination, if he does, we can already say what the central question in November will be: Is the United States one nation under God, or has it become a country where the government needs to secure a better deal for the 99 percent?

We know Romney’s view. In a television interview last month, he explained: “When you have a president encouraging the idea of dividing America based on the 99 percent versus 1 percent — and those people who have been most successful will be in the 1 percent — you have opened up a whole new wave of approach in this country which is entirely inconsistent with the concept of one nation under God.”

Meanwhile, in his State of the Union address, the president opted explicitly for the 99 percent perspective. Restoring their fortunes is “the defining issue of our time,” he said. “No challenge is more urgent. No debate more important. We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.”

The Obama analysis gets a lift from “The China Syndrome,” a recent paper on the impact of trade with China by a powerful troika of economists: David H. Autor, David Dorn and Gordon H. Hanson. The empirical study, which was cited in an important speech on inequality a few weeks ago by Alan Krueger, chairman of the president’s Council of Economic Advisers, is particularly significant because it marks a shift in consensus thinking in the academy.

In the debate about the causes of growing income inequality, U.S. economists have tended to opt for technology as the driving force. Indeed, in his remarks, Krueger referred to a survey he did of those economists, who overwhelmingly cited technological change as the most important factor.

Global capitalism isn’t working for the American middle class. That isn’t a headline from the left-leaning Huffington Post, or a comment on Glenn Beck’s right-wing populist blackboard. It is, instead, the conclusion of a rigorous analysis bearing the imprimatur of the U.S. establishment: the paper’s lead author is Michael Spence, recipient of the Nobel Prize in economic sciences, and it was published by the Council on Foreign Relations.

Spence and his co-author, Sandile Hlatshwayo, examined the changes in the structure of the U.S. economy, particularly employment trends, over the past 20 years. They found that value added per U.S. worker increased sharply during that period – 21 per cent for the economy as a whole, and 44 per cent in the “tradable” sector, which is geek-speak for those businesses integrated into the global economy. But even as productivity soared, wages and job opportunities stagnated.

The take-away is this: Globalization is making U.S. companies more productive, but the benefits are mostly being enjoyed by the C-suite. The middle class, meanwhile, is struggling to find work, and many of the jobs available are poorly paid.