For this Religion & Liberty interview, we’ve rounded up data about unemployment, the economy, free trade, talking points from the 2016 presidential election and more. We’re interested in getting different viewpoints from Acton writers and lecturers on what the data show.
In a March column titled “The view from the rustbelt,” the Economist writer Lexington began with these lines: “America feels sick at heart this year. Can conventional politics cure that malaise, or will voters turn to those peddling radical remedies, from trade wars to high border walls?” Indeed, after decades of bipartisan agreement on the benefits of free trade and the market economy, that consensus appears to be in tatters. Massive voter turnout in presidential primaries, spurred on by the populist appeal of socialist Democrat Bernie Sanders and anti-trade Republican Donald Trump, is giving heartburn to those who have advocated for smaller government and deeper participation in an expanding global economy. As Lexington concludes in his column, bluecollar workers feel passionately “that the economy is stacked against them, and want larger changes to capitalism than mainstream politicians can deliver. What then?”
Justin Beene is the director of the Grand Rapids Center for Community Transformation, a partnership between Building Bridges Professional Services, a social enterprise that trains and employs high-risk youth, and Bethany Christian Services. He serves on the Board of Overflow Christian Community Development Association in Benton Harbor, Michigan, and the International Advisory Board of the Center for Transforming Mission in Guatemala City, Guatemala.
Ismael Hernandez is the founder of the Freedom & Virtue Institute. He grew up in Puerto Rico as the son of a committed Marxist and a founding member of the Socialist Party. When he came to America to attend graduate school, his experiences began to slowly shatter his preconceived notions about the United States and his avid communist beliefs. He began to read writings of and about America’s Founding Fathers and learned the principles of America’s origins. He is the author of Not Tragically Colored: Freedom, Personhood and the Renewal of Black America (2016).
Ann Marie Jakubowski is a Grand Rapids native and a former intern at the Acton Institute. She currently resides in Philadelphia, where she is pursuing a Master of Arts degree in English literature at Villanova University.
Jared Meyer is a fellow at the Manhattan Institute. He is coauthor, with Diana Furchtgott- Roth, of Disinherited: How Washington Is Betraying America’s Young. Meyer’s research has been featured in numerous publications, including the Wall Street Journal, the New York Times, Yahoo! Finance, National Review, RealClearPolitics, the Los Angeles Times and the New York Post. He is interviewed frequently on radio and TV, including on BBC World Service, Fox News and NPR.
Vernon L. Smith was awarded the Nobel Prize in Economic Sciences in 2002 for his groundbreaking work in experimental economics. He has the George L. Argyros Chair in Finance and Economics and is a research scholar in the Economic Science Institute at Chapman University. He is the president and founder of the International Foundation for Research in Experimental Economics. He has an undergraduate degree in electrical engineering from the California Institute of Technology, a master’s degree in economics from the University of Kansas and a doctorate in economics from Harvard.
UNEMPLOYMENT
According to a National Bureau of Economic Research study, unemployment rates may not hit pre-recession levels until the 2020s. From a prerecession level of 66 percent, labor-force participation dropped to 62.7 percent in September 2015.
R&L: How do we get people working? How do we reengage the individuals who have given up on finding work, especially minority/ underprivileged individuals who may see work in the “underground” economy as their only solution?
Ismael Hernandez: Coming to the United States from Puerto Rico allowed me to confront safe assumptions of a “red-diaper baby” who grew up in a country mired in poverty. The realities of American life helped me realize that the prism through which I previously looked at reality was blurred—I had the benefit of contrast. The lived experience of freedom shattered my universe.
Yet as I surrendered the dream of socialism and realized that my idols (Che, Fidel, Marx, Minh) were charismatic but flawed men who bought into a lie, I was surprised to see so many Americans treading the path I was abandoning! I realized that many Americans seemed bored in affluence, bored with the anomie that freedom can offer when it is not combined with a moral- cultural ethos that places the human person, unique and unrepeatable, at the center of social action. In a society that has lost its ethical bearings and questions the very essence of what makes it free, charismatic men can find fertile ground by offering the grand new world. They can appeal to base sentiments where the enemy is the other: the rich, the immigrant, the Chinese.
We get people back to work by renewing our minds and by rejecting the “us against them” paradigm. A lived experience of freedom through local action is the answer. By creating simple, practical, meaningful and replicable projects that engage people in economic activity, we can show the way. That lived experience eventually flowers in lives dedicated to work, risktaking and creativity. We can show that a society that values individual freedom and also loves the poor is possible without the activism of the state.
Justin Beene: There are two primary things that come to mind surrounding the issues of worker engagement and work for people of color. First, worker engagement is much more complex than most understand or are willing to admit. Historical slavery, racism and the “new” Jim Crow or criminal justice system, according to Michelle Alexander’s research, now imprisons more men of color today than there were slaves in 1865. The outrageous rate of incarceration and lack of employers hiring returning citizens, or in many instances even allowing them to volunteer, massively cripples people’s ability to create a livelihood for themselves. Secondly, the lack of the general public acknowledging white privilege, as well as systematic, and institutional racism continues to perpetuate the problem— creating a false sense of superiority in many privileged whites and a false sense of inferiority in many people of color in this country. Ultimately this false sense of identity creates all kinds of psychological, health and spiritual problems for people on both sides—further trapping folks into the self-fulfilling prophecy.
I think solutions have to be multi-faceted and cross-sectoral; there is no such thing as a simple cookie-cutter approach that is going to help move the needle when it comes to getting folks back in the labor market. However, our politicians and general media seem to take one of two misconstrued ideologies of business: 1) that its profits should be used to support real ministries, programs or nonprofits through looking at ways to transfer wealth from the rich to the poor or 2) that profit maximization is the ultimate goal of business, and so America needs to shut down its borders and control everyone else so that we can have a bigger piece of the economic pie.
John Paul II essentially said in Entrepreneurship in the Catholic Tradition that every business should be shaped in a way that allows its employees to build community and transcend— or that business is more than profit. It’s about meeting a real need that both its employees have, as well as meeting a need in the marketplace. So one challenge is how do we get businesses to be willing to take on this type of charge and holistic understanding of their business? And secondly, how do we continue to create more opportunities and the right, nonracist environment where people of color are able to create wealth for themselves through business instead of being held captive to government programs?
I think we need to decrease the negative stories in the media about people of color—especially in relation to the disproportionate amount of street crime reported all over the nation that perpetuates these false inferior/superior complexes. We must begin uplifting the positive stories of successful entrepreneurs (and there are many), systematically building the belief in young men and women that success is not just possible but expected and normal. Further, we need to begin educating our students in urban areas on how to practically start businesses and give them the opportunity to fail early on. Giving them the exposure to business and sound economic principles is important.
FREE TRADE
The Wall Street Journal recently ran a piece titled “Free trade loses political favor,” which examined the results of populist backlash in polling places. “According to Michigan exit polls, Democratic voters who believed trade deals reduce U.S. jobs backed presidential candidate Bernie Sanders by a 56 to 41 percent margin. And in Mississippi, it was Republicans who said trade was a job killer, not Democrats, according to exit polls. Democrats there by a 43 to 41 percent margin said trade boosted job growth,” the newspaper concluded.
R&L: While economists have shown widespread support for the benefits of free trade, have we paid too little attention to the particular adverse effects on some people?
Vernon L. Smith: How many of the people who see trade as a job killer shop in stores like Wal-Mart that have lower prices?
The impact of free trade on our economic life begins with price-conscious consumers beneficially choosing lower-priced products. When I was a student living in Boston in the 1950s, the textile industry was relocating to the South where wages were lower, material costs were lower, and the cost of clothing could be reduced. This industrialization raised wages in the South, and eventually the industry moved offshore.
The causes of lower prices are not visible like job loss; both voters and candidates focus on job loss, not the consumer benefits. Free choice by consumers causes investors to constantly seek lower-cost ways of producing, and this most prominently includes new machine technology. The adverse consequences of innovation and economic change are not new. The Luddite rebellion of early 19th-century England was a populist revolt of the textile workers who smashed the new factory machines that were displacing workers. Every populist increase in the minimum wage has immediate adverse impacts on entry-level young adults in the labor force, especially blacks and Hispanics. The long-term effect includes a shifting of some production overseas, but more importantly, are accelerating automation.
With automation, much of the earlier shift to overseas production has returned home, but the jobs have not returned.
Charts available at the Federal Reserve Bank of St. Louis show the large impact of automation in the reduction of manufacturing employment. From 2000 to 2010, an index of manufacturing employment declined from 145 to 97, and today has only recovered to 103. But since 2000, manufacturing output, after two recession dips, has now recovered from 112 to 132. This is not due to foreign trade but to the rapid substitution of machine-factory capital for labor.
The negative income tax, proposed decades ago by Milton Friedman as an alternative to minimum wages, was designed to respond compassionately to those adversely affected by economic change, while maintaining incentives to work and produce at market wages and to attract young adults into the labor force.
MILLENNIAL VOTERS
The much reported dimming of job opportunities for millennials and distaste for the market economy was reflected in a February poll that showed that Democratic candidate Bernie Sanders “was favored by a whopping 74 percent among 18 to 44 year-olds, compared with 23 percent for Hillary Clinton.” The New York Times noted that Sanders’ political rallies “feel like a combination revival meeting and rock musical festival, down to the funky vendors hawking rainbow-hued ‘Feel the Bern’ merchandise.”
R&L: Why have millennials overwhelmingly rejected free-market principles and rallied behind Bernie Sanders?
Jared Meyer: The reality is not as simple as it seems. Though millennials overwhelmingly support Bernie Sanders, most are not on board with democratic socialism—and very few support full socialism.
Perhaps the clearest indicator of this reality is that only 16 percent of millennials can correctly define socialism. This could be why less than one-third of millennials favor government control of the economy over a free market.
This is a case of different generations defining terms differently. Since millennials did not grow up in the Cold-War era, they equate socialism with more generous Scandinavian-style welfare states instead of the immense level of human suffering that baby boomers and other previous generations witnessed.
Additionally, millennials do not yet realize that Scandinavian policies will lead to Scandinavian middle-class taxes. The U.S. tax code is about five times as progressive (falls more heavily on high-income earners) as tax codes in Scandinavian countries. This means the middle class pays a much larger portion of income taxes in the Scandinavian countries to fund their expansive social programs. Though many millennials have not yet had to pay in-come taxes, there is nothing to suggest that they will want to hand over a larger portion of their incomes than did their parents and grandparents.
Lastly, millennials are not as strongly in favor of increased government regulation as many people assume. They strongly support entrepreneurs, and they detest barriers to entrepreneurship. Their appreciation for how difficult it is to start a business goes far beyond their near-universal reverence for the late Steve Jobs. Two-thirds of millennials want to work for themselves in the future.
Perhaps the sharing economy’s rise—and the subsequent hostile response of some policymakers—is why only 18 percent of millennials think regulators primarily have the public’s interest in mind. This is far short of the support that would be necessary for a government takeover of the economy.
Millennials are clearly “feeling the Bern,” but this does not mean America’s largest generation is comprised of Socialists. Let’s be honest—no millennial wants the government to tell Apple how many iPhones it can make or what features it can include in the iPhone 7.
Ann Marie Jakubowski: Although it sounds antithetical, free-market proponents could learn a lot from Bernie Sanders. His significant success among millennials speaks to the priorities of young adult voters today and to the effectiveness of consistent authenticity as a strategy for earning votes against the odds. Sanders has a strong foothold among millennial voters because young adult voters have the impression that the odds for economic success are stacked against them in the free-market system. Sanders’ decades of commitment to his radical political positions give him, if nothing else, an aura of authenticity that is difficult to find in politics today.
It would be reductive to assume that millennials support Sanders just because they don’t know any better. On the contrary, the younger generation has genuinely good intentions and a desire to see Americans prosper at all levels of society, and it seems that a message of prosperity and possibility via the free market is not getting through to them. Proponents of the free market need to find ways to convey the radical possibilities for success that are built into their own economic plans. The current public conversation about a free-market economy seems to be more about the markets than the people themselves, and millennial voters are impressed by Sanders’ ability to articulate his economic vision in terms of the actual people affected by it. By emphasizing the free market’s impact on human beings instead of on tariffs or trade deals, candidates can tap into the millennials’ desire for forward progress and increased possibility. And they can earn the young voters’ loyalty by emulating Sanders’ obvious passion and authenticity, even if they channel it toward a polar-opposite economic plan.
