A Lack of Labor

Labor Day isn’t what it used to be. Yesteryear’s huge crowds of cheering unionists who filled places like Cadillac Square in downtown Detroit are no more, and the confusion over what’s still what in the booming new economy has made the presidential-campaign debate about economic issues a thin mix of smug cliches. The peril is that this overconfidence will come back to haunt the next administration.

This doesn’t have much to do with Vice President Al Gore’s new neo-populism--probably at least one-third to one-half sincere--that has clearly done him a lot of good (8-10 points worth) in the polls. Sure, there is a large phony quotient: Populists don’t usually graduate from prep school and Harvard, and Gore didn’t attack the really big industries that have given him money (technology, telecommunications and entertainment). However, his pitch made basic political sense by undercutting Ralph Nader’s third-party competition, baiting GOP-leaning industries that the public already distrusts (oil, drugs, insurance and tobacco) and hitting the Bush family with one of its least-favorite political strategies.

The late Lee Atwater, campaign manager for former President George Bush, admitted after the 1988 election, “The way to win a presidential race against the Republicans is to develop the class warfare issue, as [Michael] Dukakis did at the end. To divide up the haves and have-nots and to try and reinvigorate the New Deal coalition.” Four years later, populist rhetoric--”the rich get the gold mine and the middle class gets the shaft”--helped elect Bill Clinton and beat Bush Sr. Small wonder it’s now unnerving the Bush Jr.

But despite this new hint of pizazz, the economic debate between Texas Gov. George W. Bush and Gore barely goes beyond taxes and prescription-drug benefits. When it comes to the underlying domestic and international economy, both candidates are singing from the same establishment hymnal. The 9-year-old economic up cycle is bound to keep rolling. The Federal Reserve has everything under control. Cheap goods from China and Mexico are a boon because they keep inflation down. It’s unfair to say rising wealth concentration is leaving the median family in the dust, but, hey, globalization is the future, even if it costs factory jobs--and, off the record, contributors love it.

Three or four decades ago, the clout of the U.S. labor movement would have made this kind of politico-economic nonchalance impossible. Not now. In some ways, “labor” has become a counterproductive word--too physical, even too uncool--to describe the activities of the huge majority of Americans in the service or knowledge industries. They’re no more attuned to the pain of manufacturing workers being swept aside than late-19th-century industrial workers and middle class were to the plight of struggling farmers.

Then and now, great economic transformations riding on the back of new-wave booms are confusing for people in the middle, disastrous for the less skilled and ill-educated, and enormously rewarding for those with capital, skills and education. The latter tend to control both policymaking and the national debate. So it is in 2000. It’s this broad complex of economic issues that represents the dangerous omission in the national debate.

Consider: The current business-recovery cycle is almost 10 years old, longer than any before. Thus the prospects for its continuance--six months, one year, two?--ought to be a sidebar to every Washington policy discussion. But that would unnerve the stock market. It would also disrupt bipartisan happy talk about everything we seemingly can now afford.

Like previous boom cycles in the late 19th century and earlier in the 20th, the boom of the 1980s and 1990s has been marked by an ever-widening gap between the rich and everyone else. If you look at the top 30 families and individuals in the annual Forbes 400 list for 1999, the range of their fortunes is 10 times higher than the top 30 of 1982; yet, in this same period, median family income barely stayed ahead of inflation. Obscene CEO-to-worker pay ratios are more of the same. But where’s the debate?

So, too, for the increasingly central role of the Federal Reserve Board in the U.S. economy. The Fed, which makes no secret of its distaste for increases in employee wages and benefits, has open and official ties to the banking industry, which it bails out whenever required. But the Fed can do no wrong.

Globalization--a vague word for letting U.S. corporations shift investments and hiring plans overseas--is too important to multinational firms with big Washington lobbies and even bigger checkbooks. Bush and Gore will dissect the World Trade Organization, the North American Free Trade Agreement, normalization of trade with China, Mexico and “fast track” when Miami has a 12-inch snowfall.

Nader talks about these issues, and Reform Party nominee Pat Buchanan used to, but Gore’s semi-populism may dry up Nader’s audience. As for Buchanan, his acceptance speech at the Reform Party’s August convention identified the “unborn” as the foremost “forgotten Americans.” This suggests Kulturkampf is likely to replace economic populism as Buchanan’s tool for transcending his comic-book nomination scramble and achieving his critical 5% of the vote in November.

The importance of the vacuum in the economic debate is this: The four most dangerous words in the English language, even to graybeards on Wall Street, are: “It’s different this time.” Yet, the whole unvoiced assumption of mainstream U.S. politics in this election year is that it is different this time, so the critical debate omissions have become common wisdom.

As long as the stock market stays more or less in its current trading range, and as long as oil prices don’t go more than a dollar or two above $30 a barrel, Bush and Gore can avoid the possible problems. And that’s just 10 weeks more, which makes it likely.

This will leave all sorts of things for the next administration to deal with. The neglected business cycle is the most obvious boomerang. Take the never-ending talk about the new economy making the business cycle obsolete. Discussions about the end of business cycles or new panics being impossible go back to the 1870s and again in the 1920s and 1960s. Not much is new.

If it isn’t different this time, moreover, that will bring another old equation back into play: the thesis of the so-called Austrian School of economics: that the longer the prosperity and the bigger the speculative bubble, the bigger the ultimate pop. Smug politicians are themselves a caution sign, because some of the shallowest economic discussions came in the years 1872, 1928 and 1968-1972, just before bad downturns.

Another unnerving sign is the ever-widening gap between the ordinary family--the $40,000-a-year household whose record debt burden dwarfs its stock portfolio--and the tech deca-billionaires whose daily ups and downs are the stuff of media CEO wealth meters. Even forgetting justice and equity, such gaps and preoccupations have been leading indicators of former great bubbles and their bursting.

The Fed chairman and Treasury secretary are thought to be too smart, too well equipped with preventatives, for anything to go wrong. This is also an old song. Fed Chairman Alan Greenspan’s recent interest-rate hikes--not so forceful if you look at history--have been hailed for taming inflation and ensuring the economy (and the stock market) a soft landing--just like Greenspan’s 1994-95 rate hikes. Success having been declared, no discussion is necessary.

But consider another precedent. In 1980, Fed Chairman Paul A. Volcker, new to his job, raised interest rates to tame inflation and then backed off when the economy started to slide into what could have been a serious election-year recession. As a result, he had to start all over again a year later, and the outcome was a brutal downturn that pushed the U.S. unemployment rate above 10% for the first time since the Great Depression. Greenspan may also have stopped too soon out of deference to an imminent election and stock-market averages.

Even globalization is intertwined with the fate of the new economy. Just possibly we can’t afford to have $300-billion-a-year trade deficits in which we import so much oil and so many manufactured goods. But the cheap goods and parts from Mexico and China that cost jobs in Ohio suppress wages, keep inflation down and help keep the Dow Jones up, even if almost 50% of the capital gains go to the top 1% of Americans. The Fed, Bush and Gore are all pleased.

It is our great experiment. The record in such things is that optimism prevails--fed by the years of naysayers being embarrassed--until the bubble pops and it is too late.

Possibly the emptiness of the Bush-Gore dialogue now connotes wisdom. Perhaps the four words “It’s different this time” have become truth, and their “danger” is only to the investment portfolios of the cautious. Yet, on this obsolete holiday weekend, when labor’s defeat by capital seems so painfully advanced, it’s hard to avoid the feeling that the inability of our national leaders to debate the great economic transformation underway is a dangerous failure waiting for an unexpected consequence. *