In the US, as many believe, is happening now, internal political shift from cosmopolitanism to nationalism, from urban “elites” with leftist views to the village of “populist” right-wing. The dominant economic ideology is also changing – from corporateville policies of redistribution and regulation to a policy, similar to the old corporatism, involving extensive state intervention.

Both of these changes caused dissatisfaction of the voters. For decades, Americans believed that flying on a magic carpet of economic growth caused by advances in science, and then the heyday of Silicon valley. In reality, however, since the 1970-ies, total factor productivity grew slowly. The Internet boom of 1996-2004 was just a fleeting deviation from this trend.

Over time, in response to the decline of profitability of the business began to reduce investment, productivity growth and hourly wages slowed down, many household workers began to fall out of the workforce.

This is the “secular stagnation”, which was once described by Alvin Hansen. She especially touched the rich establishment, as ultra-low interest rates have caused a sharp jump in stock prices. But a large proportion of citizens were angry with the country’s leadership, which seems to have been some other priorities rather than the restoration of universal economic growth. Some commentators have even begun to come to the conclusion that capitalism is exhausted, and the economy now will fall in a relatively stationary condition of repletion of capital.

In fact, since 1970, the total payments for labor (salary plus various bonuses) grew only slightly slower than total profits, and the growth of average wages at the group of citizens who are at the bottom of the income scale, was not slower than the “middle class”. However, the average hourly payments to workers in the private sector which narutopedia positions in the workplace, grew significantly slower than all the others. In addition, the level of economic activity of men is significantly decreased in comparison with the level of economic activity of women. In 2015, the share of industrial jobs in total employment was only one-fourth of the 1970 level.

These men lost the chance to do meaningful work, to feel their involvement in something important. They were deprived of space, where they could thrive, gain satisfaction from success, to grow professionally

Because of the disappearance of industrial jobs in the us rust belt have predominantly white males from working class standards of life have become no better than their parents. For many years, especially in the region of the Appalachian mountains, they feel like their society a little respect. They lost the opportunity to play an important role in their families, cities, country, and their sense of injustice is increasing due to the fact that, in their opinion, people with high salaries do not pay their share, while others receive benefits without working.

However, there are deeper reasons for their discontent. These men lost the chance to do meaningful work, to feel their involvement in something important. They were deprived of space, where they could thrive, gain satisfaction from success, to grow professionally. They would like to be able to dream about something significant and create it. “Good job” in the industry gave these men the prospect of new challenges, training, appropriate promotion. Status, work in retail or the services sector offers nothing of the sort.

Losing the “good job”, these men lost the main source of meaning in their lives. Evidence of this loss was the increase of suicides and deaths from drugs among Americans identified in the study of Anne Case and Angus Deaton.

The first signs of decline in American innovation activity appeared already in the late 1960-ies

In search of adequate solutions to this problem, we must first consider the basic causes of stagnation in the West. In his work of 1934, Hansen wrote that “the cause of secular stagnation is the lack of new inventions or new industries.” But as shown in my book “Mass flourishing: How grassroots innovation have become a source of new jobs, new opportunities and changes,” the first signs of decline in American innovation activity appeared in late 1960-ies.

By the time the innovative spirit of America (the love of imagination, research, experimentation, creation) was weakened by the corporatist ideology that pierced all levels of government and replacing the ideology of individualism, through which capitalism thrives. Although private ownership is still a lot, a significant share of the private sector is now somehow controlled by the government. A private person with a new idea often requires the approval of the authorities of his startup companies that come out on already existing markets have to compete with previously established firms that typically have already enlisted the support of the authorities. And while Silicon valley has created a new industry, increasing the pace of innovation, it also faced a decline in profitability.

To revitalize innovation activity we need to change business practices. Future administration of U.S. President Donald trump, for his part, should focus on the development of competition, not just deregulation. Unfortunately, this issue has not yet been in the focus of trump: he rarely mentions the innovation, and his team prepares threat solutions that can actually undermine the process of innovation.

Corporatist policies we have not seen since Nazi Germany and Italy of the 1930-ies

First, trump believes that the difficulties of American workers to blame international trade, and not the disappearance of the innovation. Yes, some very capable economists seem to share this opinion. But while the traditional “innovative country”, for example, USA, UK, France, faced with a significant decline in economic activity of men, this level increased “trade countries” such as Germany and the Netherlands. This means that the main culprit is the lack of innovation, not trade.

Second, trump believes that the measures on the side of the market supply, contributing to the growth of corporate profits, increase incomes and create jobs. But this approach can cause explosive growth of the national debt and, ultimately, a deep recession.

Finally, and worst of all, trump is confident that the one scolding corporations, for example, Ford and Carrier, and the support of others, such as Google, will allow to increase production and employment. This kind of corporatist policies we have not seen since Nazi Germany and Italy of the 1930-ies. If we keep this mentality, government intervention in the business sector to protect existing companies blocking the market entry of new will increase. As a result, the arteries of the economy are clogged and it would certainly be more to hold back innovation than to promote innovation among established insiders.

Policy needs to respond to the danger of the revival of corporatism in the trump. Such approaches to the current problems of economic stagnation can drive the final nail into the heart of innovation – and the American working class.

Edmund Phelps – Nobel prize winner in Economics 2006, Director of the Center for the study of capitalism and society at Columbia University, author of “Mass flourishing: How grassroots innovation have become a source of new jobs, new opportunities and changes

Copyright: Project Syndicate, 2017




Trump, corporatism and lack of innovation 27.01.2017

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