American workers are in crisis. Wages have stagnated for decades, and millions have fled the labor force entirely—the 19 percent of prime-age males lacking full-time work in 2018 would have marked the worst year on record prior to the Great Recession. Life expectancy is falling nationwide, driven by rising substance abuse and suicide among those without a college degree. This crisis was neither unforeseeable nor uncontrollable; it is the result of America’s choice to define prosperity solely in terms of consumption and shape economic policy accordingly.
The abandonment of the American worker can be linked with two major developments in midcentury economic thinking, which combined to produce the central metaphor of modern American politics: the economic pie. The first was the overwhelming importance assigned to measurement of the economy’s total size. This had been critical to the federal government’s Keynesian response to the Great Depression, which relied on public spending to boost demand and thus production. Such management of the economy required accurate knowledge of production levels and trends, so the U.S. Department of Commerce developed the system of national accounting that became the Gross Domestic Product, a Herculean effort whose leader, Simon Kuznets, would win the Nobel Prize in Economic Sciences. When the Depression gave way to a global military conflict, the outcome of which would turn on the industrial capacity of the Allied and Axis economies, GDP became an existential concern.
As the economy regained its peacetime footing, national accounts recorded fewer M4 Sherman tanks headed to the front and more Chevrolet Bel Air convertibles destined for the suburbs. Notwithstanding Kuznets’s warning to Congress that “the welfare of a nation can … scarcely be inferred from a measurement of national income,” GDP quickly became the primary measure of prosperity, and GDP growth the primary goal of economic policy. Long after saturation bombing ended, cross-country comparisons of GDP remained the means for assessing national power.
The second key midcentury development in economic thinking was the ascent of consumers and the priority given to their interests at the expense of producers. Of course, production and consumption are two sides of the same coin, and each person potentially plays both roles. If unions drive wages higher and prices rise, households might benefit in their paychecks and suffer in the checkout line simultaneously. If cheap imports drive domestic manufacturers out of business, the reverse might be true. But the goals of rising productivity for workers of all skill levels and in all places versus maximizing what each household can consume lead to very different policy agendas.
This tendency to prioritize consumption goes back at least to the days of Adam Smith, who wrote in The Wealth of Nations, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” With the Depression, the principle became entrenched, as Keynesians struggled to ensure sufficient demand.
The broader 1960s cultural shift toward individualism and the priority placed on fulfilling desires also moved the consumer toward the economy’s center. In modern America, efforts to promote the virtue of production over the vice of consumption are often regarded as archaic curiosities. “There is almost nothing more important we can do for our young than convince them that production is more satisfying than consumption,” wrote Republican Senator Ben Sasse in his best-selling 2017 book The Vanishing American Adult. In its review, The Atlantic characterized this view as “stoicism” and “self-denial.”
These trends helped bring about a dramatic expansion of the welfare state. Trillions of dollars poured into low-income households as the welfare system sought to guarantee an individual’s right to consumption, while doing nothing about (if not actively retarding) his ability to become more productive. Today, a welfare benefit such as the Supplemental Nutrition Assistance Program (SNAP, or food stamps) gets credit for “lifting people out of poverty” merely because the benefit’s cash value raises the recipients’ income above the poverty threshold, even though it does nothing to help them gain a foothold in the economy and provide for themselves.
The conviction that GDP offers a reliable proxy for prosperity, and that each individual’s satisfaction depends on the share of GDP she can consume, underlies the “economic pie” metaphor, which was born in the postwar years as well. Per the metaphor, a person’s helping of pie is dictated by two factors: the pie’s total size, and the share allocated to the slice. Pie being an obviously desirable and delicious dessert, one’s instinct is to fight for a larger share at the expense of others. But if the pie grows—or, seeing as pies do not grow—if we just bake a bigger one, everyone can have more.
“Economic piety” has gained remarkably widespread acceptance. Presidents Truman, Kennedy, Johnson, Ford, Reagan, H. W. Bush, Clinton, and Obama all deployed it. Republicans tend to promote free markets that will grow the pie rapidly, while grudgingly accepting a role for government in apportionment. Democrats focus more on the role of government in guaranteeing big enough portions for all, but generally recognize that more growth will mean more to go around.
Results have been extraordinary: National GDP has tripled over the past 40 years; spending on programs for redistribution has quadrupled. The problem is not so much that public policy has failed as that it has succeeded at the wrong things. America is like the classic romcom heroine who, as the trailer intones, “had it all, or so she thought.” She has the prestigious job and the elegant apartment, yet she is not happy.
A constructive definition of prosperity would look different in two ways. First, within the economic context, it would emphasize the ability to produce rather than the ability to consume. Second, it would attend to not only economic outcomes but also social foundations. Much modern policy analysis works from the assumption that only quantifiable economic impacts matter, either because economic growth, and the accompanying rise in consumption, is an end unto itself, or because growth and consumption can be trusted to benefit society more broadly. This is wrong: Economic policies have dramatic effects on family and community health, and the health of those social institutions in turn influences the economy profoundly.
Productive activities lie at the heart of most people’s conception of a good life. Higher material living standards are desirable, but fulfilling obligations and serving others, supporting a family, contributing to a community, and attaining competence or even excellence in a vocation are tied much more closely to life satisfaction, a flourishing society, and the creation of opportunity for the next generation. More tangibly, engaging in productive work is critical to self-esteem, mental health, and life satisfaction. Unemployed Americans are twice as likely as full-time workers to receive treatment for depression; the long-term unemployed are three times as likely. In empirical happiness studies, life satisfaction drops 10 times more from unemployment than from a substantial loss of income. And while people return to their previously self-reported levels of happiness several years after marrying, divorcing, becoming widowed, or welcoming a first child into the world, they never get used to joblessness.
The choice to emphasize consumption over production also has political consequences. To paraphrase President John F. Kennedy, will people ask what they can do for their country or what their country can do for them? Will they feel that they owe society the best they can produce, or that society owes them what they want to consume? Valuing consumption above all offers what looks like a get-out-of-jail-free card: government spending. Like a medieval indulgence, a promise of redistribution cures all. And if replacing lost income with a government benefit solves little or makes a bad problem worse, this merely drives the indulgence’s price higher next time around.
A healthier economic policy, alongside a focus on people’s interests as workers, would recognize the importance of pluralism. Economic piety envisions the entire nation gaining or losing ground at once. Money being fungible, everyone is presumed to have access to whatever he might choose to buy. Production is not so simple. People have different priorities, excel in different ways, and find meaning in different places, so a production-oriented prosperity that extends across society must offer numerous paths to its achievement. Cities may be more economically productive, for example, but not everyone wants to live in a city. Pluralism facilitates prosperity by allowing people to order their lives in ways closer to their ideals.
Pluralism aspires to a form of genuine opportunity, not “equal opportunity,” which has come to stand in American politics for the unachievable objective that every child should have equal life chances of arriving at any destination. That is plainly impossible in a world in which individuals possess different innate characteristics and grow up in different environments. Pluralism’s genuine opportunity, in contrast, means that every person, no matter where she begins, has some agency to set the direction of her life, to pursue accomplishments that give her life meaning, to support a family, and to raise children who will themselves have a wider range of choices than was available to her.
In practical terms, this concept of prosperity—call it “productive pluralism”—points toward a very different model for economic policy. Rather than maximizing GDP at every moment in time, the overriding focus must be on the labor market’s health—ensuring that it reaches an equilibrium in which workers of widely varying aptitudes in all parts of the country can support strong families and communities. A labor market, like any market, responds to the conditions in which it operates. If its outcomes are ones unacceptable to society, then policy makers must alter those conditions.
An education system that promises “college or bust,” for instance, produces some college graduates and a lot of busts; a fine way to grow GDP but a disaster for the many who are left behind. Efforts at environmental protection must be far more sensitive to the burdens imposed on industries such as manufacturing, construction, and resource extraction—ones in which many less-skilled workers, especially men, can work most productively and at the highest wages. A share of the more than $1 trillion spent annually on safety-net programs such as food stamps, disability, and Medicaid should go instead toward a subsidy for low-wage workers that puts money directly into their paychecks, encouraging employers to create such jobs and workers to take them.
An emphasis on labor-market health also changes the analysis of trade and immigration policy. In consumer-welfare terms, unconstrained trade and immigration appear to be unmitigated goods. Not so from the worker’s perspective. How society draws borders around its labor market matters a great deal, and imbalances take a serious toll. A high level of trade can be beneficial, but a large trade deficit is a problem: It represents a dramatic expansion of labor supply with no accompanying expansion of demand. A high level of unskilled immigration, likewise, is unwise amidst concern about the limited opportunities available to the existing unskilled workforce.
Productive pluralism not only aligns better than economic piety with people’s needs at each moment in time, but also offers a superior formula for long-term prosperity by providing the foundations for replicating themselves over time. In other words, productive pluralism is sustainable.
Sustainability has a technical meaning. The term is flung around casually in politics and, increasingly, in corporate marketing materials. But the canonical definition, provided in 1987 by the United Nations’ World Commission on Environment and Development, is striking: Sustainable development “meets the needs of the present without compromising the ability of future generations to meet their own needs.” This provides a practical and moral principle divorced from any particular policy context—a litmus test that can be applied anywhere.
While sustainability is generally associated with environmentalism, the issues it raises are not only, or even primarily, ones of natural and ecological resources. What matters is the vitality of the endowments that allow society to replicate and expand its prosperity, year after year, generation after generation. If economic growth fails to nourish the endowments on which it relies, it is not sustainable. Farmers want to maximize crop yields, but most know better than to do this at the expense of their soil.
Society’s economic endowments of physical and intellectual capital—the infrastructure and machinery and innovation that power the economy—are quite robust; the capitalist system naturally invests in their upkeep and ensures that economic activity expands rather than depletes their stock. Social endowments are another matter. America’s families and communities are responsible for transmitting opportunity, shaping minds, and instilling values from one generation to the next. Families are overwhelmingly responsible for socializing children and preparing them for productive lives. Communities play an important role in that process, too, and their economic profiles and support structures largely dictate the choices available to their members.
Unlike economic endowments, social endowments have proved themselves highly vulnerable to depletion from—among other things—consumption-oriented policies, which erode opportunity and set in motion a downward spiral, in which the next generation, beginning from a worse point, can likely offer even less to the one that follows. When ways of life vanish or towns crumble or industries flee overseas, they are not easily replaced. When self-sufficiency gives way to dependence, cultural norms shatter. Families that fail to form or fall apart leave both adults and children adrift.
Productive pluralism fosters the opposite dynamic. It prioritizes outcomes that nourish and replenish social endowments, supporting the formation of strong families and the vibrancy of strong communities. If people understand prosperity, and measure their own lives, in terms of the contributions they make to continued social health, they spur a virtuous cycle: Productive citizens create even greater opportunity for the next generation of productive citizens. That’s what long-term prosperity looks like.
Of course, economic growth remains vital. But not all growth is equally beneficial, and the policy choices that yield the most immediate short-term growth don’t necessarily prepare the ground for sustained economic and social progress. Material gains are better understood as the emergent property of long-term prosperity. Alongside stable institutions that protect basic freedoms, productive pluralism of strong families and communities leads to entrepreneurship, innovation, and rising productivity. It should come as no surprise that measures of social trust are highly correlated with GDP across countries and entrepreneurship across individuals.
Traditional economic theory also leads society astray in identifying specialization as the key to prosperity; the MIT professor César Hidalgo and the Harvard professor Ricardo Hausmann have shown the opposite to be true. The more diverse the array of knowledge within an economy, the stronger its long-term health. If productive capacity atrophies—even as consumption rises—that poses a serious problem, because that capacity is not something that an economy can scale back up at will. Experience must accumulate; supply chains must develop; productivity must grow percentage point by percentage point, year by year. Where capacity and know-how are lost or not built, it becomes necessary to start over from behind those who moved more steadily forward.
Residential mobility is the issue that best captures policy makers’ misunderstanding of prosperity and the social endowments that foster it. The willingness to pack up and move in pursuit of opportunity is part and parcel of the American Dream and a key element of the nation’s economic vitality. Yet, as hardship has increased in recent decades, the share of the population that relocates has declined. If things are so terrible, some economists grumble, why won’t anyone move? They have built elaborate models to show how much higher GDP would be if only people lived where their productivity would be highest.
This gets things backward. Strong families and communities launch people into the world to seek their fortune. Relocation requires deep stores of social capital. Without the skills and habits to access opportunity, failure is likely. Lacking a strong support base, it can be hard to get started. If someone is already dependent on government benefits and a move places those benefits at risk, staying put can seem the better bet. Geographic mobility can’t rescue America from the consequences of its socially unsustainable growth—because lower geographic mobility is one of those consequences.
Certainly genuine pluralism requires the opportunity to relocate. But in most circumstances, it should also include the opportunity to stay, a choice that has always been and remains the norm—and one Americans should applaud, not lament. Even when mobility was much higher, it rarely amounted to the abandonment of existing communities. The migration of “Okies” from the Dust Bowl of the 1930s may be the iconic American image of relocation in search of opportunity, but Oklahoma’s population declined only 2 percent during that decade. In Kansas and Nebraska, the declines were less than 5 percent. As technology obliterated agricultural employment, the population of Iowa held steady or increased in every decade from 1880 to 1980.
Relocation tears people away from their communities. If a critical mass relocates, it can decimate the community left behind. The idea that struggling communities should disband themselves is not a return to “how things used to be”; it is an admission of catastrophic failure and a prescription for further disaster. If Americans want to enjoy the fruits of long-term prosperity, including widespread relocation in pursuit of opportunity, they will need to restore its prerequisites. And that requires, literally, work.