By Reva Goujon, Reva Goujon
You may have noticed by now that there is a strong air of existentialism surrounding the 2020 U.S. presidential campaign. Environmental policy has vaulted from being a fringe electoral issue to prompting calls for a national emergency on climate change. The "socialist" label is being bandied left and right as a way of questioning the very survival and moral legitimacy of U.S. capitalism. And foreign policy debates are raging over China's attempt to unseat the United States in a tech-fueled battle for global supremacy — a global great power competition.
These are big, whopping issues. And while they're certainly not new, they're currently being debated with fresh and unusual levels of frankness and ferocity.
So, why is all this existential angst spilling over now?
The Rear View
The story of how we got here begins with demographics. Today, more women are pursuing higher education and prioritizing career advancement over child-rearing than ever before. That fact, combined with the rising costs of urban living, has translated into lower birth rates across most of the developed world over the past seven decades. At the same time, thanks to the marvels of modern medicine and overall healthier living, human lifespans are increasing. A growing number of retirees are preparing to leave the workforce, expecting their pension payouts at the relatively vital age of 65. And governments now have the unpleasant job of figuring out how to transfer that massive financial burden onto the shoulders of a shrinking number of young workers.
Meanwhile, the rate of automation since the early 1970s has steadily and rapidly increased and, at the same time, international trade links have deepened. With the industrial powerhouse of China leading the pack since the early 1980s, the developing world experienced overall rising levels of prosperity — along with carbon emissions — as foreign companies inserted themselves into a web of corporate supply chains spanning the globe. Markets salivated at gross domestic product growth rates of 8, 10 or even 15 percent in the developing world, and the term "emerging markets" was born.
As a growing number of retirees prepare to leave the workforce, expecting their pension payouts at the relatively vital age of 65, governments now have the unpleasant job of figuring out how to transfer that massive financial burden onto the shoulders of a shrinking number of young workers.
From the perspective of Washington, there was little reason to stand in the way of this global capitalist bonanza. Liberals and conservatives alike even preached that the virtues of a capitalist model had the power to wholly transform authoritarian regimes across the world into liberal democracies. And as long as U.S. consumers were gaining access to cheaper products, deregulation largely prevailed. Since the 1970s in particular, U.S. antitrust law has shifted away from being heavily interventionist in the name of protecting smaller businesses, moving instead toward protecting consumers with competitive prices in the name of the free market. This evolution paved the way for today's U.S.-based and globe-spanning tech giants to monopolize entire sectors of the economy by feeding off consumer data, all while storing the bulk of their profits in tax havens overseas.
The Reckoning is Real
The consequences of these long-running trends are on full display in the 2020 U.S. presidential race.
Let's start with the analysis of an average American's paycheck. In the three decades that followed World War II, U.S. productivity and wages grew roughly in tandem. A relatively steady social contract among employers, workers and the government during that period established employer-backed health care as the foundation of the American health care system. But that trend saw a critical break in the early 1970s as productivity continued to rise while hourly wages and benefits for the average American worker stagnated. According to data from the Economic Policy Institute, from 1973 to 2017, U.S. productivity rose 77 percent, while a typical worker's hourly compensation lagged, growing at 12.4 percent when adjusted for inflation.
And while middle- and low-income workers have seen their wages stagnate, the wealthiest Americans have only been getting wealthier. According to a recent study in the National Bureau of Economic Research by economist Gabriel Zucman, the top 0.1 percent of the population now own more than the bottom 80 percent of U.S. households, a measure of inequality that has been accelerating since the 1980s and bears a striking resemblance to the wealth distribution of authoritarian-run states like China and Russia.
This is the disturbing backdrop against which a growing number of young Americans are burying themselves in student loans to earn a university degree that is less and less likely to translate into meaningful income growth. And while it is much easier today, as compared to the 1980s, to work remotely and supplement income through participation in the gig economy as an independent contractor, the result is an often-exhausted, indebted workforce lacking the basic protections and benefits needed to live a quality life. Shifts in consumer patterns and life decisions have followed this trend: When when trying to save for retirement is already near-impossible, why incur the economic and social costs of having children and buying a home and car — especially when disposable income can go toward more immediate pleasures, like food and travel, and more environmentally sustainable living overall?
According to data from the Economic Policy Institute, from 1973 to 2017, U.S. productivity rose 77 percent while a typical worker's hourly compensation lagged, growing at 12.4 percent when adjusted for inflation.
Indeed, younger Americans have been able to push climate policy to the forefront of political debates largely because they are more educated on the issue and will be the ones dealing with the serious effects of global warming within their lifetime. According to a 2018 Gallup poll, 70 percent of Americans aged 18 to 34 worry about global warming, compared with 62 percent aged 35 to 54 and 56 percent aged 55 or older. The generation gap between baby boomers and millennials further translates into a partisan gap, with Gallup polling showing that younger voters are more likely to identify with the Democratic Party and a more progressive position on climate change. That said, there are growing signs that younger members of the Republican Party are also applying pressure on the party's leaders to take a more centrist position on climate policy.
Climate policy is just one of many hot-button issues contributing to deepening polarization across the country, which is easily compounded by firebrand political personalities on both sides of the political divide. But the widening chasm between liberal and conservative voters in the United States has structural roots as well. The rise of a more globalized economy in recent decades has largely driven economic benefits and population growth to the country's more diverse coastal centers, while the American Midwest, centered on the Mississippi Basin, has been in steady decline. The shifting American economic core will take time to manifest in census data, and political representation at the federal level will be skewed until it does. Meanwhile, in the federal government, paralysis pervades, and steel and agricultural lobbies from the historical heartland continue to exert outsized political influence.
During the 2016 presidential campaign, urban voters in the Midwest who have seen industrial sectors gutted by globalization in recent decades became the main audience for a political agenda centered on trade protectionism, hammering their rural counterparts in the process when U.S. agriculture became a prime target for trade retaliation. Growing scrutiny over ever-expanding free trade agreements and populist pledges to save the original heartland from foreign competition makes for potent politics. But recent policies designed to resurrect trade barriers in an economy dependent on deeply entwined supply chains across the globe have not necessarily made for smart economics. Even so, the rules-and-consensus-based trading order that grew out of the postwar era and is embodied by the World Trade Organization has failed to hold economic giants like China accountable for serious trade abuses, paving the way for a more unilateralist U.S. trade agenda and higher trade friction overall.
When Domestic Problems Clash With Global Forces
The steady political fracturing and fraying social contract in the United States both come at a time when Washington can ill afford to be distracted from growing international competition. As Chinese supply chains blanketed the globe over the past half-century, China's military grew in tandem with its economy and began challenging U.S. global primacy. The groundwork is being laid for a potential confrontation over Taiwan in the next decade, and a race for technological supremacy is already well underway between the two economic giants. Beijing is throwing resources and manpower behind a national campaign to surpass the United States as the world's leader in artificial intelligence development while offering a tempting model of digital authoritarianism to governments seeking an alternative to the Western liberal order.
The steady political fracturing and fraying social contract in the United States both come at a time when Washington can ill afford to be distracted from growing international competition.
An economically and technologically weaker Russia, meanwhile, has spent the past two decades recovering from its post-Cold War chaos and surging into the former Soviet periphery, rattling Europe. The European Union, afflicted by the same package of stressors as the United States (aging populations, weaker economic growth and xenophobia over immigration), has been fracturing under economic, political and social duress for the past decade and is now fighting for relevance in a renewed era of great power competition. China and Russia are finding more reasons to align in resisting a U.S.-led order, while a divided Europe grapples with how to balance its transatlantic political ties with its economic partnerships in the east. Altogether, this adds up to a colossal Eurasian challenge for the United States in the years ahead.
The Questions that Rule the Day
Powerful, multigenerational structural forces have converged to form a global geopolitical inflection point. Naturally, the political battles of the day are emotionally charged, spawning generational divisions between those who yearn for the way things were and those who sense the urgency to incite big change but feel trapped by legacy political norms. And in an age of information deluge and ever-shortening attention spans, a political leader or activist who can speak with confidence and avoid blemishing their arguments with critical — but distracting — nuance can ironically come off as more trustworthy to the masses than those who espouse a more moderate, more informed line of thinking.
The road to big political change is treacherous, but it is nonetheless the road we are on. And with big changes come big questions. Below is a selection of the underlying questions that have been fueling angst around the 2020 race.
If the link between productivity gains and rising labor income has fundamentally broken, how can and should the social contract among government, companies and workers be reformed?
Who is even responsible for tackling this question? This is a challenge that cannot be resolved solely by trickle-down policy theorists out of Washington or Silicon Valley techno-idealists preaching universal income. No one ideological faction, political group or corporate institution has the answer, but more progressive companies are likely to be the incubators of best practices for efficiently reinvesting in the American workforce, scaling up skills training, devising new incentives to retain talent and giving a broader employee base a stake in corporate profits.
What is a reliable 21st-century model to measure a country's well-being? The world has long been obsessed with GDP growth and output to reflect the "success" of a nation. Political leaders sell their constituents on what they will do to hit a certain GDP target and emphasize driving growth above all else. The hyperfocus on GDP is convenient for political soundbites, but it was never intended to be the proxy measurement for a nation's overall well-being. How would countries stack up against each other if we temper our GDP obsession and look more holistically at a collection of vital indicators, including income growth adjusted for inflation, quality of health care and environmental costs?
How can the education sector be reformed to lift debt burdens on U.S. youth and train them in vital science, technology, engineering and math skills as well as for the cognitive, creative thinking abilities that will be crucial in a future economy powered by AI and other automation tools?
As massive spending requirements for health care, pensions, education and sustainable infrastructure-building balloon the U.S. deficit, what's the right balance of fiscal and monetary policy? If aging, advanced economies are stuck in a period of weak growth and low inflation, does the U.S. government have more room to expand deficit spending for increasingly urgent economic goals? Or would it be playing with fire to take dollar primacy for granted and risk runaway inflation?
Will more companies adapt their policies to recognize that rational parental leave and affordable child care are the first critical step toward driving a stable demographic future and long-term economic growth?
How will more selective immigration policies in the developed world, which are increasingly geared toward skilled workers and common cultural values, affect the stability of countries that no longer have a labor-absorbing developmental model to drive growth? How will rising instability in those countries impact U.S. foreign policy?
How can and should an ossified and leaky U.S. tax code be rehauled to address growing wealth inequality?
If the traditional corporate model is fraying, how does the country evolve away from employer-based health care? And will big tech companies have the disruptive power to create more quality, autonomous health care for consumers?
Even if federal policy remains frozen, will corporations and initiatives at the state level be able to drive more sustainable — and economically pragmatic — environmental policy to make an appreciable difference in global emissions?
How will U.S. antitrust policy evolve to address the rise and consolidation of American tech monopolies? (Big tech has its own nuances to contend with: services are mostly free, consumers pay in data, and tech platforms are not going to be as efficient when fragmented. An antitrust policy predicated on consumer prices is ill-fitted to address the challenge of tech monopolies and privacy concerns.)
How does the United States balance the growing need to regulate big tech without hobbling the very companies it needs to maintain a competitive edge over its geopolitical adversaries? This is a dynamic all the more complicated by the fact that the country's "national champions" are run by multinational boards.
These are all questions that will drive a lot of debate — and political vitriol — in the race to 2020 and beyond. The list is far from comprehensive, but if we at least start with a few deceptively simple questions, remember the path that led us here, avoid distracting political labels and temper our emotions when debating them, we have a better chance of creating enough mental space to think big and embrace, rather than repel, the nuance needed to understand and ultimately innovate our way through this dense web of challenges.
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