In my last post I acknowledged the incredible power of thinking on the Right since 1960, generating ideas that changed the course of world history. But this success seems to have blinded the Right to the power and importance of equality.

What, exactly, does the Right have to say about equality? The answer is “not much.” The attitude of the Right (not always articulated out loud) is that equality corrupts capitalism, and absolute equality corrupts capitalism absolutely. You can read a lot of conservative thinking and come away with nothing more on the subject of equality than the old chestnut, “a rising tide raises all boats.”

Maybe so, but recently it looks as though those yachts out on the horizon are rising a lot faster than the rowboats back by the dock. After barely a decade of across-the-board success, capitalism seems to be leaving a lot of people behind in the US: average incomes today are lower than they were in 1989, a generation earlier. And the damage is heavily concentrated in the lower middle class. The famous “47%” that Mitt Romney hung around his neck like an albatross has been abandoned by the Right, even as the infamous “1%” has prospered mightily. A better metaphor for capitalism in the US might be this one: The train has left the station and half the passengers aren’t on board.

The 47% aren’t a fringe element who just ain’t got game – they’re half the US population, basically from the middle of the middle class down. In a global world, where all children born will find themselves competing against seven billion others, the top half of the US population is doing quite well, thank you. (I mean the top half no matter how you measure it: incomes, educational levels, social cohesion.) They possess skills that are in short supply in the developing world but that are globally in demand.

For example, a really, really good orthopedic surgeon in the 1950s might live in a big house and drive a nice car, but he occupied pretty much the same world as everyone else – his name wouldn’t be known even two towns over. But today a really, really good orthopedic surgeon is a global rock star, earning staggeringly more than the guys on the assembly line. On a smaller scale this is also true of the above-the-middle-of-the-middle-class lawyers and executives and financial advisors and salespeople and so many others.

Not so for the 47%. Their skill levels aren’t that radically different from the skills of billions of Chinese, Indians and Brazilians, all of whom work a lot cheaper. Their skills, in other words, are in low global demand and high global supply.

One response to the plight of the lower middle class in America is that they simply need to improve their game – they need to go to college, or at least get better post-high school training. There’s truth to this, but it’s mainly a canard. If you filled up all the open jobs for truck drivers and welders and oil field workers, you might reduce the problem from the “47%” to the “43%.” A help, but hardly a solution.

And getting the bottom half of the population to graduate from college isn’t much of a solution, either. We’re always hearing about statistics that show college graduates earn twice as much over their working lifetimes than high school graduates. But think about that for a minute. If I know how much somebody earned over his working lifetime, the guy must be retired by now, right? Which means he must have gone to college in the 1950s and 1960s. Hello? Does anyone remember what percentage of kids went to college back then? Does anyone remember what colleges were like back then? (Hint: think “institutions of higher learning.”)

If virtually everyone in the country needs to graduate from college, then college needs to be dumbed down. It might sound horribly elitist, but to pretend otherwise is to lie to millions of hopeful young people. The reality today is that except among a small group of elite schools, and among the kids at the top half of the class in lesser schools, a college diploma is almost worthless: it and twenty-five yuan will buy you a latte in Chóngqìng.

You wouldn’t hear the Right say so publicly (except when Mitt thinks he’s not being recorded), but another dominant view from the Right is that all this may be too bad for the lower middle class in America, but capitalism is improving the lives of billions of people elsewhere, which is what matters. That’s true but  extremely shortsighted. If American power and influence declines, is the resulting world going to look good to conservatives? Hardly. As George Friedman of Strafor recently put it:

“If we move to a system where half the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated.”(1)

In short, the great ideas of the Right that destroyed Communism and socialism and led to the global adoption of capitalism need badly to be updated. If they aren’t, two things will happen.

The first, and worst, is the dissolution of the American lower middle class. I grew up in a small Midwestern town, the sort of place that used to be the backbone of America. My town was once dubbed, by the Columbus Dispatch, “The quintessential Midwestern small town.”(2) We were all working class kids back then, and we grew up more-or-less behaving ourselves and working hard. Today, we’re all middle class or better.

But when I go back, what I see horrifies me. Small towns in America are sinking under an epidemic of divorce, family violence, obesity, and addiction to painkillers and other drugs. The schools are rotten. Unemployment is high and chronic. There are meth labs in the basements. These aren’t diseases caused by viruses or bacteria, they are the diseases of hopelessness. The Left doesn’t offer hope, but at least it offers comfort, via financial transfers from the 53%. The Right offers nothing.

The second thing that will happen is that the Right will be out of power in America for a very long time. The 47% may not turn out in the same proportions as other voters, but they do turn out – and they can be mobilized. If only a tiny proportion of the 53% votes with the 47% – and they certainly will – the Republican Party has no chance of holding national office, except perhaps in the House. The Senate and the Presidency will be ceded to an increasingly left-wing Democratic Party essentially forever.

Is this what conservatives want? If not, we need some radical new thinking from that side of the political spectrum.

 

(1) “The Crisis of the Middle Class and American Power,” Stratfor, January 8, 2013.

(2) The Dispatch did a multi-part series on the town, and in the course of that series they interviewed the town’s most famous citizen. (OK, the town’s only famous citizen.) The reporter said, “I notice that in 1880 the town’s population was 1,497 and in 1980 the population was 1,496. You seem to have discovered the secret to human population control! Can you share that secret with us?” “Sure,” said the famous citizen, “Back home, when a girl gets pregnant, two guys leave town.”

Next up: The Fed and the Parmenides Fallacy

 

Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.