This book has described how the vanishing middle class has left behind a dual economy as depicted by the Lewis model. The FTE sector makes political choices largely for itself, neglecting the needs of the low-wage sector in order to keep their taxes low. As Lewis observed, the “capitalists” of the FTE sector want to keep wages low in the low-wage sector to provide abundant cheap labor for their businesses.
The choices made in the United States include keeping the low-wage sector quiet by mass incarceration, housing segregation, and disenfranchisement. These oppressive policies were justified by racecraft, that is, the belief that races exist and that racial discrimination is warranted, as explained in chapter 5. The low-wage sector includes roughly 80 percent of Americans, but African Americans are only 15 percent of the population. Even if all blacks were in the low-wage sector they still would comprise only a minority. Nonetheless the policies designed to keep the low-wage sector in place are rationalized by assertions that the members of the low-wage sector are black, with racecraft providing support. It does not seem to bother political discussions that the majority of people in the low-wage sector are white. Latino immigrants have joined African Americans in the low-wage sector in recent years, reducing the white share to a slim majority.
Any member of the low-wage sector who tries to rise into the FTE sector must do so through education. Finding his or her way through the educational process to gain skills that offer a good chance of entering the FTE sector has been made difficult in several ways. The loss of social capital in the low-wage sector makes it hard for members to stay with education long enough to make this transition. And the policies of the FTE sector have crippled the fabled American educational system to the degree that very few members of the low-wage sector have access to schools that can pave the way to the FTE sector. This has been conceptualized as the failure of increasingly segregated black schools in the early twenty-first century, but the damage is much wider than the damage to this minority population. The failure of schools affects white and Latino members of the low-wage sector as much as blacks. Social mobility has decreased as inequality has increased.
Low-wage whites were largely invisible in public policy until the political turmoil of 2016, and increasing numbers of them were dying in their lives of quiet despair. The mortality of less-educated, middle-aged white men increased from drug and alcohol poisoning, suicide, and chronic liver disease and cirrhosis. The mortality of all other groups and ages continued its long-run decline, and the contrast with the increasing mortality of low-wage whites stands out sharply from this trend. Whites with less education—those who had not made the transition to the FTE sector—had the largest increases in mortality.1
The presidential race of 2016 revealed and fostered the anger of the low-wage sector. Donald Trump, the candidate of the Republican Party, appealed to whites in the low-wage sector to express their frustration and despair. The poor whites were unnoticed collateral damage until this campaign, but their anger dominated meetings where Trump spoke. Violence may have been stimulated when the candidate alluded to the majority minority oxymoron and assured the audience they were better than African Americans and Latino immigrants. Bernie Sanders, an insurgent Democratic candidate, appealed to another branch of the low-wage sector, those who were trying to move into the FTE sector. As described in chapter 4, they more often did not make it and had to deal with massive student debts. Only time will tell how these attempts to wake this sleeping giant will affect America.2
The FTE sector makes plans for itself, typically ignoring the needs of the low-wage sector. This can be seen in policies for health care, public education, mass incarceration, infrastructure investment, and debt reduction since the 2008 financial crisis. Public support has eroded since the 1970s for both health care and public education, typically on the basis that the benefits would go primarily to African Americans. Latinos entering the United States after 1970 typically started off poor and in the same schools. As public education increasingly failed to provide a transition into the FTE sector for members of the low-wage sector, mass incarceration acted as a New Jim Crow policy to keep blacks and Latinos more recently from full participation in American society. The failure to maintain and update the nation’s infrastructure and to revive the economy by reducing mortgages that could not be paid after the housing bubble burst demonstrates the FTE sector’s separation from the low-wage sector and its unwillingness to spend its members’ money on things that do not benefit them directly, even though there might be indirect effects that benefit the whole economy.3
The top 1 percent of the population shown in figure 3 has disproportionate effect on economic policies. Even more than other members of the FTE sector, the top 1 percent resists tax increases and asserts that the government should cut government spending instead. One percenters say that government debts are a larger problem than any of the problems discussed here. Their remedy is to cut spending on these programs even more.4
The division of the economy comes in part from the hollowing out of the wage distribution and the consequent destruction of middle-class jobs. David Autor, an expert labor economist, argued that technical progress will continue and that the shape of employment will evolve. He compared the low-wage sector to Luddites who opposed the introduction of machines in the Industrial Revolution and appealed to the industrialization that eventually raised their wages. But it took a half century from the “Hungry Twenties”—the 1820s when Luddites were active—for British wages to begin their ascent, with many political changes along the way. The danger for America is that the combination of a dual economy and racecraft is leading to political decisions that freeze the dual economy in place. It will be hard for the forces of technological change and globalization to reunify the American economy in any reasonable time.5
We are in a time of crisis similar in many ways to the crisis of the 1930s. John Dewey, philosopher of modern education that plays a central role in the revived Lewis model, gave a set of lectures published in Liberalism and Social Action in 1935 that provide a clear way to close this discussion. Dewey argued that liberalism arose in the nineteenth century as a theory of individual actions to oppose and destroy the restraints on individual actions that had accumulated through centuries of European civilization. But while this ideology led to beneficial changes at the dawn of industrialization, the changes were outmoded later by the very fruits of liberal actions. Small-scale production characteristic of the first Industrial Revolution was superseded by the large business firms of the second Industrial Revolution a century ago. Scarcity as a general condition of society was replaced by abundance in America. Insecurity went from a stimulus to economic progress to a condition that leads to despair. The promotion of security has now become the mark of a successful democracy, as described in chapter 8.
In this new context, Dewey stated, “The liberal spirit is marked by its own picture of the pattern that is required: a social organization that will make possible effective liberty and opportunity for personal growth in mind and spirit in all individuals. Its present need is recognition that established material security is a prerequisite of the ends it cherishes.” This view was restated more precisely by Piketty in Capital in the Twenty-First Century where he said that social states of the twentieth century were based on providing education, health, and retirement for all. In these passages, I believe that “all” means all, irrespective of race, gender, or income.6
In order to achieve these ends in today’s environment, I propose a set of five actions. They will be difficult to accomplish in our current political context, but they provide a plan of action that could start now and grow. Even if we can act on only the first few recommendations, they may be sufficient to start us toward the others.
The first recommendation starts with providing high-quality preschool education available for all children in the United States. Head Start demonstrated that early education has a very high payoff. This is vitally important to start making a change in our dual economy since education benefits every individual and benefits to the country as bright students grow into innovative adults—as explained earlier.
The benefits of early education, however, only continue if the educational system continues to stimulate and teach growing children. Early education is only the start of education; we need to upgrade all of education that now serves the low-wage sector. We need to recognize that education in a dual economy is not simply a program for children. A commitment to education is easier to make if repressive policies are abandoned, and these recommendations support each other. School reforms done in a vacuum tend not to have lasting effects; urban schools need to offset the harmful effects of social disintegration caused by low wages and unemployment. Preschools are needed to introduce three- and four-year-olds to reading when they come from homes without books. This student-friendly approach can be coupled with the best practice of schools that have been discovered and with the extra resources for poor families and children recommended thirty years ago.
Public universities also need to be refinanced. The current system of low public support for state universities leads to borrowing by students and the growth of educational debts. Just as support for early and K–12 education needs to be increased, public support for state universities needs to be supported as originally designed to provide a college education to all. Only then will our educational system begin to merge into a unitary educational system.
The second recommendation is to reverse the package of policies that act together to repress both white and black poor people. Depriving men of a good education dooms many of them to unemployment and criminal activity. They land in prison, and their children grow up in single-parent families. The boys grow up to be men like their absent fathers, and the cycle repeats itself. (Women are also at risk, but men are more frequently arrested.) To eliminate this pattern, we need to work on several fronts at the same time. We need to end mass incarceration and differential rates of arrests and convictions of black men by local and state police and judges. We need also to improve education for the children of felons and allow freed felons to rejoin the workforce. And we need to rethink our urban policies to pursue the integrated housing that has so far eluded us.
The first two recommendations are two sides of the same coin. American education cannot be universal until mass incarceration is abandoned. And mass incarceration will not be an inevitable result of growing up in a poor neighborhood until urban public education equals the quality of suburban schools. These joint changes will benefit white, black, and brown Americans alike. As noted earlier, even though the political discussion focuses on African Americans; poverty affects children growing up independent of color. And since many white Americans are poor, these improvements will affect more white Americans than African Americans and Latino immigrants combined.
The third recommendation is to start upgrading our infrastructure. Both candidates for president in 2016 campaigned on promises to do this. They claimed it would help low-wage workers by providing jobs for them as well as improving our cities. The process will take a long time, and it will provide both short-term and long-term benefits. It may increase the federal debt in the short run, as the very rich fear, but this increase should be viewed as an investment in the American economy. If done well, it should help the economy to grow the way a good investment helps a business to grow.
This recommendation could provide jobs for many workers who dropped out of the labor force after the 2008 financial crisis. This improvement in the incomes of households who are suffering from the problems described earlier will spread the recovery from the 2008 financial crisis more widely among the American population. The short-run benefit will turn into a longer benefit as better roads, bridges, and public transit will enable our cities to function better. Good infrastructure is not by itself the major part of economic growth, but it is like an oil that lubricates the private economy and stimulates economic growth.
Forgiving the accumulation of debt in the low-wage sector also would stimulate economic growth. These kinds of debts have mushroomed since 1970 and 2008; they oppress the low-wage sector and reduce the power of consumption. The politics of this issue are even more difficult than infrastructure politics. There, only taxes need to be raised. Here, most debts are to private financial institutions, and these banks and other lenders need to be paid off or convinced to write down loans. This has proven to add difficulties to any resolution.
The fourth recommendation is to recognize and reverse our slide into the kind of country that Lewis described in his model of a dual economy. We need to acknowledge that a democratic government is the best tool to increase the income and security of all its citizens. We have neglected our physical and educational capital stock to an alarming degree. Privatizing them will not unify our country; private businesses have different goals than public agencies do. Using the tools of democratic governments is the only thing that will enable all citizens to achieve their potential. If the government appears laggard today; that is due to lack of political and economic support. More appropriations will strengthen government programs and morale.
It became more difficult for the government to spend money to help the economy, particularly the low-wage sector, after the Supreme Court decided in 2010 in Citizens United v. Federal Election Commission to regard money as speech and allow the very rich to have a dominant place in politics. The Investment Theory of Politics came into its own in this new framework. As described in chapter 7, the Kochtopus took advantage of Citizens United faster than the disorganized Democrats could and elected several conservative governors and many conservative members of Congress. It has become difficult to sustain existing government programs, much less initiate new ones.
The last recommendation is to revive what has been called the Second Reconstruction of the 1960s and 1970s to point the way to an integrated American society. This means overcoming three hundred years of American history, far more than the thirty or forty years that are the focus here. It should start with Congress or the Supreme Court reversing the 2013 decision to diminish the Voting Rights Act in Shelby County v. Holder. Making our oligarchic form of government more democratic will provide a powerful stimulus to full citizenship by all citizens.
This should help start a public conversation to understand our complicated past. The United States was based initially on slavery. We no longer approve of this subjugation of people, and we do not have slaves. Nevertheless, we still oppress the descendants of American slaves. We should instead work toward integrating African Americans, Latinos, and other immigrants into our neighborhoods and schools. We should educate these students well to allow extraordinary individuals to flower and benefit us all.
This is a tall order, and the political structure of the United States appears to be dysfunctional. As discussed in chapter 10, early education is key to starting to close the gap between the sectors of our dual economy. Education leads to mobility, and education has to start early to overcome the problems arising from poor and dysfunctional families.7
Even if we cannot get very far in the quest for a just society, education benefits all and is worth pursuing. One of the reasons that the United States has been at the forefront of many economic activities is that there are lots of people here who have creative ideas. There is no reason to believe that people are born smarter in the United States than elsewhere. But if everyone here gets enough education to use his or her creative abilities productively, we all can benefit. There will be more people with the opportunity to have creative and useful ideas. Even the richest person needs a secure place for financial assets; a strong United States implies a safe place to store value.8
We can work with and in schools as we learn more and allocate more resources into education. There is a long way to go, and this is a good way to start. As Dewey realized in 1935, liberalism must now become radical in perceiving that thoroughgoing changes are needed in the current setup of many institutions. We must aim to provide all children with a roughly equal start in life, through our schools and early educational programs if their parents are absent or incapacitated. A just society strives to give all its members a chance to participate fully in society, and early guidance and instruction for low-wage children moves us toward a just society.9
Making these changes means going from W. Arthur Lewis to a new, inclusive, and democratic model of our society, and it will be a long process. As described here, we have been digging ourselves into this hole for over forty years. It will take us many years to climb out. The first step when you find yourself in a hole, however, is to stop digging.