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So You Want to be Rich and Famous? Stop Fantasizing!

May 20, 2013

Rich Guy Okay folks, be forewarned that this post is a bit of a rant. However, it’s written through the leadership lens of self-empowerment.

In a period of unrelenting global turmoil, whether financial meltdowns, political upheavals in totalitarian-run countries or violent hurricanes that devastate communities, it’s vital that each of us learn to adapt continuously. Looking in the rearview mirror of what was, as nostalgically appealing as it may be, serves us poorly. That precarious route leaves us inadequately equipped to deal with change.

This brings me to the growing gap in the United States between reality and fantasy, where the tiny percentage of the “Haves” (the now infamous one percent) is steadily distancing itself from the rest of the population. And for my fellow Canadians we, too, are following this trend. So lose any smugness you may be holding.

The 1% control the 99% through manipulation and deceit, letting them think and dream that they, too, one day can become rich and powerful. That is not the American dream; that is the American fantasy.
– James Taggart

Many, many years ago–indeed it was 1977–when I was completing my first degree in economics, my international trade prof made a statement I’ve never forgotten: “It is the Middle Class that is the source of a nation’s innovation.” Hence the importance of creating and maintaining a robust Middle Class to drive innovation forward. I’ve never forgotten that point by Prof Don MacCharles.

Yet what we’re seeing in North America, especially America (but not to forget our friend Great Britain) is the continuing erosion of the Middle Class. In 1983, Robert Kuttner wrote a landmark essay The Declining Middle.

Unfortunately, the link between innovation and the Middle Class has never been well articulated by economists, policy wonks and business analysts, past and present, including Kuttner.

A second key point (again, courtesy of Prof MacCharles) is that one measure of a country’s wealth is its level of imports. This idea would be heresy by right wing conservatives.

While Kuttner was ahead of the pack with his prognostications, what emerged much later in some policy circles was the question of whether knowledge jobs in the service sector would make up for the loss of manufacturing and resource depletion jobs. A tangential point to this is that while many economists and others bought into the “knowledge jobs” nonsense (including corporately funded think tanks in North America), believing that job creation was healthy, they omitted to mention that what was sustaining aggregate demand to a large extent was consumer credit. Well, that balloon is steadily being deflated as we all know.

Knowledge Jobs What I find shocking is that almost no “experts” have written about how transnational corporations, which hold no allegiance to any nation, have greatly broadened their markets globally. These companies are looking beyond their traditional main markets (ie, the U.S., but including Canada and Western Europe) to new ones in China, India, South Korea, Indonesia, parts of Africa, South America, Turkey, etc. In effect, transnationals could care less about the socio-economic polarization of the United States, the decline of the Middle Class or the weakening of innovation and human capital development.

Kuttner makes a very important comment when he states:

“In theory, the shift to an economy based on services and information ought to be compatible with the equitable distribution of income and jobs. Substituting technology for human labor makes the country as a whole richer. Some economists argue that as the economy grows more productive, technology will gradually eliminate many routine, dead-end jobs, replacing them with high-skill position and more leisure for all. The market does not necessarily convert rising productivity into an acceptable distribution of income and leisure, however.

The pattern of development in much of the Third World demonstrates that it’s quite possible for an economy to attain a high rate of growth based on rapid technological progress, and still function as a society in which one half of the work force waits on the other half, and makes a good deal less. Low wages tend to foster more low wages….Few economists expect the booming high-technology field to be an important source of new jobs: its productivity is too high.”

Remember: Kuttner’s piece was written 31 years ago!

With most jobs being created at the top and the bottom of the ladder, America may have difficulty remaining a middle-class society.
– Robert Kuttner

Look at where the U.S. is now at: Educated people with plenty of experience begging for work, willing in many cases to accept an hourly rate of $7.25. College grads with ballooning student loans which they’ll never be able to pay back.

How the U.S., and Canada which is obediently trailing along, expect to sustain aggregate demand in the long-run and drive new innovation with a shrinking middle is one of those questions for people with a much higher IQ than I.

Kuttner’s concluding comment is very appropriate for our times:

The debate about the distribution of wages and the content of work has scarcely started, but it is certain to become more urgent.

So where does this leave the United States, Canada, Great Britain and a number of European countries? Searching for answers while looking through yesterday’s leadership lens won’t produce anything useful. Indeed, when a globalized world economy is combined with the controlling political influence of transnational corporations and the obsequious behavior of elected politicians, regardless of national boundary, the result will be the further polarization of society and the continuing shrinking of the Middle Class.

That’s the end of my rant. What are YOUR solutions to our dilemma?

The real question is: are America’s best days behind us? Of course they are, and always have been. We have the greatest history in the history of History. But never forget, our best days are also ahead of us and always will be. Because America also has the Greatest Future in the history of the Future. It’s the Present that’s the problem…and always will be.

– Stephen Colbert (Satirist. From America Again: Re-Becoming the Greatness We Never Were, 2012)

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