Arnold Kling  

Middle-Class Squeeze

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Larry Summers writes,

As the great corporate engines of efficiency succeed by using cutting-edge technology with low-cost labour, ordinary, middle-class workers and their employers – whether they live in the American midwest, the Ruhr valley, Latin America or eastern Europe – are left out. This is the essential reason why median family incomes lag far behind productivity growth in the US, why average family incomes in Mexico have barely grown in the 13 years since the North American Free Trade Agreement passed, and why middle-income countries without natural resources struggle to define an area of comparative advantage.

As far as the U.S. is concerned, I am a longstanding skeptic of the notion of middle-class squeeze. I know less about other countries. But I suspect that populism and government management of the economy are more likely to be the problem than the solution.

Thanks to Greg Mankiw for the pointer.

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CATEGORIES: Income Distribution

COMMENTS (1 to date)
RogerM writes:

This lends credence to Mark Steyn's book, America Alone: The End of the World As We Know It. Rampant socialism disguised as environmentalism and opposition to globalization has taken over the world and fueled anti-Americanism. I realized several years ago that the US was alone then, and will continue to grow isolated as the rest of the world, led by Europe, Russia and China, and empowered by envy, joins forces against us. They will leave us two choices: 1) Join them in socialism (the Kyoto treaty and restrictions on trade) and destroy our economy or 2) They will attempt to destroy us by isolating us via protectionsism.

For an historical precedence, check out the history of the Dutch Republic in Israel's books. When England, France, Spain and other European countries realized they couldn't compete with the Dutch, they tried to destroy the Dutch in several wars. When that failed, they raised protective trade barriers and shut out all Dutch products.

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