Frank Gets it Wrong Again

Thomas Frank, author of What's the Matter with Kansas, had an op-ed published in today's Wall Street Journal titled, "Our Great Economic U-Turn." But, just as he misinterpreted red state politics in Kansas, Frank mischaracterizes the transformation in the US and world economy. By his essay’s very title Frank implies we can make a 180-degree turn to some idyllic post-war Golden Age of laborism. But the mid-20^th century period was the historical anomaly. With the developed world outside the US devastated by two horrific wars, the US economy alone stood unchallenged. US capital and labor shared the rewards because they could afford to and wage benefits expanded. But this age ended in the early 1970s and will not return, as Frank suggests, with a few policy changes in Washington. The rest of the world has joined the game and US relative economic dominance is reverting to a more balanced norm. This is not a bad thing, as the developing world will attest.

In the US, the lost decade of the 1970s led to popular demand for the structural economic adjustments unleashed by the Reagan revolution. What Frank correctly identifies are the distributional challenges this has forced upon our economic and social institutions. Simply put, capitalism rewards capitalists and labor is an input cost. So, the opening of the world economy has weakened the bargaining power of organized labor to extract high wages. But the idea that government should tip the scales toward labor is a notion at odds with economic reality. A return to New Dealism will only restrain our competitiveness and accelerate our relative economic decline. Instead, our policies should unleash wealth creation by empowering citizens to participate in capitalism as something more than an input cost. Rather than reverting to age-old class divisions, Frank should focus his attention on how policy can apply the logic of capitalism to encourage workers to accumulate capital assets and participate in the world economy as true capitalists. We do this indirectly with retirement assets, but applied directly, shared wage and capital incomes can moderate distributional inequalities.

Lastly, Frank should reserve his ire not for the plutocrats, but for the political class that has obstructed private ownership and capital accumulation for the “have-nots” in favor of government-driven redistribution and political dependence. They have dismissed these ideas as the YoYo (You're On Your Own) society rather than the self-reliant DIY society consistent with the true American spirit. And their promise of European social welfarism is certainly a false one.

Yes, the rules of capitalism do favor the capitalists, so let’s open up the game to those truly in need. Is that not an American liberal value?