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  • For 40 years, the U.S.

  • led global economy has produced an enormous

  • improvement in human welfare.

  • Since 1981, the proportion of the world's

  • population living in extreme poverty on less than

  • a $1.90

  • per day has fallen from 42 percent ,to 10 percent.

  • But in countries with advanced economies,

  • inequality of income and wealth has surged.

  • And nowhere has it surged more than in the U.S.

  • where reliance on free market forces has been

  • strongest. That magnifies rewards for those at

  • the top and leaves most others behind.

  • The trend helps those with higher levels of

  • education and hurts the less educated.

  • It lifts residents of major cities while leaving

  • those in small towns behind.

  • For growing numbers of Americans it's just harder

  • to get ahead.

  • Why is this happened and what are the

  • consequences? Here are five causes.

  • The digital revolution creates enormous wealth for

  • those with the skills and preparation to take

  • advantage. But it eliminates what economists call

  • "middle-skill jobs."

  • Computer software and industrial machines now

  • fill roles from clerical tasks to routine

  • manufacturing that once produced middle class

  • incomes for workers without college degrees.

  • One of those forces is technological progress that

  • has increased the value of an abstract problem

  • solving, interpersonal communication or

  • organizational skills.

  • Things that highly educated workers tend to be

  • very capable of and has simultaneously devalued a

  • lot of cognitively intensive but repetitive tasks

  • in offices and production lines and so kind of

  • hollowed out the set of job activities available

  • to non-college workers and sort of pushed them

  • arguably downward into personal services, food

  • services, cleaning, security, transportation,

  • repair where their skills are more

  • interchangeable with other workers and where

  • there is less of a return to experience over the

  • lifecycle.

  • And so that has contributed downward pressure and

  • wage pressure and economic insecurity for the

  • less educated.

  • So it's really kind of created a great world for

  • the highly educated and a much less economically

  • secure and inviting world for people who don't

  • have high levels of education.

  • Competition from emerging economies like China's

  • combined with reduced trade barriers have further

  • reduced prospects for workers without advanced

  • skills. That's had devastating consequences in

  • sectors such as textiles and furniture and

  • leather goods.

  • The biggest economic story of really of the

  • century and certainly of the last 50 years has

  • been China's rise.

  • China going from a poor and backward country in

  • perpetual political and economic crisis to a

  • frontier manufacturer with pretty well-educated,

  • highly available skilled labor using modern

  • technology. So China marched up the productivity

  • technology frontier between 1980 and the present

  • at a rate almost unseen in history and because it

  • was so vast, because it had so many people, so

  • many resources, so much land, it could become you

  • know a manufacturer for now at this point more

  • than 20 percent of all world manufacturing value

  • added. And that's not just a function.

  • That's not a function of trade deals.

  • That's primarily a function of internal

  • developments in China.

  • The decision to allow free mobility of labour to

  • adopt Western technology and foreign direct

  • investment and to start trading with the world.

  • And that had a big effect on United States even

  • in the 90s.

  • But when China joined in 2001 that further opened

  • the floodgates.

  • And that had a dramatic accelerant effect on the

  • rate at which competition entered the U.S.

  • market for manufactured goods.

  • And the rate of decline of U.S.

  • manufacturing employment as a result of that.

  • Over the course of just seven years about 20

  • percent of all U.S.

  • manufacturing jobs disappeared.

  • And then they fell it fell by another cumulative

  • eleven percentage points during the Great

  • Recession. So effectively one-in-three

  • manufacturing jobs no longer existed that had

  • existed around 2000.

  • Breakthrough firms such as Apple and Amazon now

  • attract revenue across the world, which produces

  • immense jackpots for the executives who lead

  • them. And for the American cities they call home.

  • You create the innovation and you have the global

  • product market.

  • You're going to have much larger earnings than in

  • a previous generation.

  • There is increasingly divergence and economic

  • growth and economic outcomes across

  • places in the U.S..

  • And so there are just you know along with these

  • superstar workers and these superstar firms when

  • you have superstar cities in our increasingly

  • winner take all economy.

  • Meanwhile, the share of workers represented by

  • labor unions has dropped by half, shrinking their

  • power. The lowest paid workers have seen the

  • buying power of the minimum wage drop as the

  • government has not increased it to keep pace with

  • inflation.

  • Fewer than 70 percent of men with a high school

  • degree or less are working.

  • The eroded value of the minimum wage in many

  • cases, the decline in unionization, things that

  • have otherwise sort of hurt workers bargaining

  • power in ways that amplified their weakened

  • bargaining power are just coming from these

  • external forces where they were already competing

  • with technology or workers from lower wage

  • countries for example.

  • The shifting power balance has rewarded the

  • wealthiest even more through policies in

  • government and private institutions.

  • From tax changes that increased their income to

  • college admissions procedures that opened doors

  • for their children above others.

  • Actresses Felicity Huffman and Lori Loughlin are

  • headed from the red carpet to federal court.

  • 13 parents and one coach who have pled pleaded

  • guilty.

  • The market incentives inequality creates for hard

  • work and risk taking helps make America's economy

  • dynamic but it also imposes costs.

  • You need some inequality.

  • The problem is when that dynamism at a point in

  • time gives rise to dynasticism such that the

  • next generation doesn't get an equal footing. Such

  • that kids of affluent parents even if there are

  • mediocre talent get to go to the best schools and

  • get access to the you know the most after school

  • investment, the most training and so on.

  • And you know talented kids from less affluent

  • families don't get to go to these schools.

  • They don't get invested in in the same way.

  • And that's a loss for all of us.

  • That's not just a loss for them.

  • That means our society will be less productive.

  • And it fuels the nonstop turmoil in American

  • politics. Voters have thrown out the party in

  • control of the White House or one chamber of

  • Congress in six of the past seven national

  • elections.

  • 2020 promises to be just as contentious.

  • I think we're seeing that loud and clearly in the

  • sort of politics of the past few years.

  • People are increasingly likely to report that

  • they believe the system is rigged against them.

  • This is damaging both for the functioning of our

  • democracy. But I actually think also for the

  • functioning of our economy.

  • We're going to see people in increasing numbers

  • sort of dropping out of our mainstream climb to

  • economic success and so we've got this economic

  • malaise. And now we have this social malaise

  • going along with it.

  • And and it's leaving the political I mean large,

  • loud political cries for completely, I think,

  • upending our capitalist system.

For 40 years, the U.S.

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