chance that much of the world will look like today’s China 50 years down the road.
There is a broad correlation among economic growth, social change, and the hegemony of liberal democratic ideology in the world today. And at the moment, no plausible rival ideology looms. But some very troubling economic and social trends, if they continue, will both threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.
The sociologist Barrington Moore once flatly asserted, “No bourgeois, no democracy.” The Marxists didn’t get their communist utopia because mature capitalism generated middle-class societies, not working-class ones. But what if the further development of technology and globalization undermines the middle class and makes it impossible for more than a minority of citizens in an advanced society to achieve middle-class status?
There are already abundant signs that such a phase of development has begun. Median incomes in the United States have been stagnating in real terms since the 1970s. The economic impact of this stagnation has been softened to some extent by the fact that most U.S. households have shifted to two income earners in
the past generation. Moreover, as the economist Raghuram Rajan has persuasively argued, since Americans are reluctant to engage in straightforward redistribution, the United States has instead attempted a highly dangerous and inefficient form of redistribution over the past generation by subsidizing mortgages for low-income households. This trend, facilitated by a flood of liquidity pouring in from China and other countries, gave many ordinary Americans the illusion that their standards of living were rising steadily during the past decade. In this respect, the bursting of the housing bubble in 2008–9 was nothing more than a cruel reversion to the mean. Americans may today benefit from cheap cell phones, inexpensive clothing, and Facebook, but they increasingly cannot afford their own homes, or health insurance, or comfortable pensions when they retire.
A more troubling phenomenon, identified by the venture capitalist Peter Thiel and the economist Tyler Cowen, is that the benefits of the most recent waves of technological innovation have accrued disproportionately to the most talented and well-educated members of society. This phenomenon helped cause the massive growth of inequality in the United States over the past generation. In 1974, the top one percent of families took home nine percent of GDP; by 2007, that share had increased to 23.5 percent.
Trade and tax policies may have accelerated this trend, but the real villain here is technology. In earlier phases of industrialization -- the ages of textiles, coal, steel, and the internal combustion engine -- the benefits of technological changes almost always flowed down in significant ways to the rest of society in terms of employment. But this is not a law of nature. We are today living in what the scholar Shoshana Zuboff has labeled “the age of the smart machine,” in which technology is increasingly able to substitute for more and higher human functions. Every great advance for Silicon Valley likely means a loss of low-skill jobs elsewhere in the economy, a trend that is unlikely to end anytime soon.
Inequality has always existed, as a result of natural differences in talent and character. But today’s technological world vastly magnifies those differences. In a nineteenth-century agrarian society, people with strong math skills did not have that many opportunities to capitalize on their talent. Today, they can become financial wizards or software engineers and take home ever-larger proportions of the national wealth.
The other factor undermining middle-class incomes in developed countries is globalization. With the lowering of transportation and communications costs and the entry into the
global work force of hundreds of millions of new workers in developing countries, the kind of work done by the old middle class in the developed world can now be performed much more cheaply elsewhere. Under an economic model that prioritizes the maximization of aggregate income, it is inevitable that jobs will be outsourced.
Smarter ideas and policies could have contained the damage. Germany has succeeded in protecting a significant part of its manufacturing base and industrial labor force even as its companies have remained globally competitive. The United States and the United Kingdom, on the other hand, happily embraced the transition to the postindustrial service economy. Free trade became less a theory than an ideology: when members of the U.S. Congress tried to retaliate with trade sanctions against China for keeping its currency undervalued, they were indignantly charged with protectionism, as if the playing field were already level. There was a lot of happy talk about the wonders of the knowledge economy, and how dirty, dangerous manufacturing jobs would inevitably be replaced by highly educated workers doing creative and interesting things. This was a gauzy veil placed over the hard facts of deindustrial-ization. It overlooked the fact that the benefits of the new order accrued disproportionately to
a very small number of people in finance and high technology, interests that dominated the media and the general political conversation.
THE ABSENT LEFT
One of the most puzzling features of the world in the aftermath of the financial crisis is that so far, populism has taken primarily a right-wing form, not a left-wing one.
In the United States, for example, although the Tea Party is anti-elitist in its rhetoric, its members vote for conservative politicians who serve the interests of precisely those financiers and corporate elites they claim to despise. There are many explanations for this phenomenon. They include a deeply embedded belief in equality of opportunity rather than equality of outcome and the fact that cultural issues, such as abortion and gun rights, crosscut economic ones.
But the deeper reason a broad-based populist left has failed to materialize is an intellectual one. It has been several decades since anyone on the left has been able to articulate, first, a coherent analysis of what happens to the structure of advanced societies as they undergo economic change and, second, a realistic agenda that has any hope of protecting a middle-class society.
The main trends in left-wing thought in the last two