Politically, the new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest. But the agenda it put forward to protect middle-class life could not simply rely on the existing mechanisms of the welfare state. The ideology would need to somehow redesign the public sector, freeing it from its dependence on existing stakeholders and using new, technology-empowered approaches to delivering services. It would have to argue forthrightly for more redistribution and present a realistic route to ending interest groups' domination of politics.
I recommend the article (which may be gated). He is saying that neither the left nor the right has a solution for growing inequality and the stagnating middle class. Let us consider some possibilities.
1. Maybe the middle class is not going to stagnate. Both Tyler Cowen and Eric Brynjolfsson have it wrong. We are all in a pessimistic mood now, but once the economy picks up, upward mobility will resume.
2. Many people are slipping downward relative to the top, but their attitude is "We're all right, Jack." People are able to satisfy their main consumer needs, and they don't really want a Great Redistributor to come and steal from the rich people to give them a few more dollars.
3. Ultimately, the people will fall for a demagogue. We will have our own Hugo Chavez.
4. The center will recover. Government will become more competent, and this competence will improve the well-being of the middle class.
5. Democracy will fail gracefully. We will head toward a "thousands nations" world of competitive government. People will not worry about their status relative to the richest individuals in the West. They will just try to find the most congenial community in which to live.