What Economic Indicators Hide: America's Poor Next Door

Written by Peter Georgescu via Forbes on 8/8/2018

A recent opinion piece in Bloomberg caught my eye with its headline suggesting that the economic indicators aren’t telling the whole story of what’s going on in America.  In short, it suggests that a growing number of corporate leaders fear we’re headed for a downturn.  Honestly, I think the situation is worse than that.   We’re facing a simple reality.  A complicated and cataclysmic problem that has been escalating in this country for four decades – the inequality of income and opportunity – is getting much worse for the 60% of Americans who must borrow to put food on the table.  Further, and perhaps of greater concerns, is that our collective ability to define, discuss, and solve the problem has all but disappeared.

Support for this contention is pervasive.  In-depth, detailed coverage of world, national and even local issues of high importance is continually overshadowed by the President’s latest tweet and the ever-growing intrigue around him.  Fascination is beginning to outweigh facts.   It's becoming rare to see a mention of inequality, despite the fact that it is arguably the most critical challenge facing our way of life, our economy, our democracy and our national security.  Occasionally there is an ad-hoc story describing the misery of the out-of-sight “other” America, or a book, like Hillbilly Elegy, captures our imagination.  These unconnected glimpses are soon forgotten, lost amid the salacious coverage that has become the new normal. I’ve learned in my business life and my long career in advertising that this is what our public demands. But this is a case of wanting what’s not actually good for us.   Meantime, media outlets are under fire themselves, frequently finding their substantive stories dismissed as “fake news”.

While the media maelstrom rages on with little mention of inequality, nearly forty years of neglect and denial about it and its devastating consequences continues and two separate Americas have emerged slowly, zip code by zip code, creating two distinct tribal nations in our supposedly united states.  Today when we talk about America we usually mean the plutocratic twenty to thirty percent of the population.  That’s where the successful upper-income people live and work, where most businesses exist, where the top schools and universities find their home, and where the government does its work.  When we talk about America as the most powerful nation in the world, we are in fact referring only to the elite class and our military might.

Ironically, it is the “other” America that gave us the current administration. Donald Trump seized on the dire needs of these struggling “poor next door” that have become our middle class and who saw him as the candidate who understood their grievances, frustrations, and failed promises. They know about living paycheck to paycheck.  They know their schools are among the worst in the developed world and that early education for their children is unavailable in their part of our great land.  Trump and Bernie Sanders promised them a better life and a greater America. For a brief moment, this “other” America came into focus.  We began to hear their pain and the campaign’s promises.  However, once our new leaders were sworn in the plight of the poor next door all but disappeared from view.

Despite their powerful role in the 2016 election and all the promises made, neither new law nor even a seriously considered proposal designed to address the needs of this “other” America has been introduced.  Instead, legislation passed or seriously contemplated, like the tax plan and healthcare reform, has had the effect of pushing the rims of this Grand Canyon of inequality ever wider.

To be clear, inequality is neither a Republican nor a Democratic issue.  Neither party, over time, has made it a consistent priority, addressed it with meaningful reforms, or even communicated the essence of the problem with clarity to the American people.  I’ll leave the blame game to historians.  But, what must be grasped is that inequality is America’s existential problem.  There isn’t a single segment in America that won’t be disastrously affected by a lack of action.  The current situation is simply not sustainable.  History is irrefutably consistent. So, ignoring inequality means it will either be resolved by redistributing wealth or by redistributing poverty.  Neither solution is enduring, constructive, or without significant pain.  I know this in a very personal way.  I grew up in Communist Romania, arriving in the U.S. at 15, after spending five years in a labor camp where I worked ten hour days, six days a week. During that time, all Romanians were called to the center of town and ordered to bring their life savings.  The cash was collected and replaced with a newly created currency worth a fraction of the original. Millions became hundreds in a single transaction. This is redistribution of wealth and poverty in its purest form and illustrates that change, whether it is created by serious social unrest or at the ballot box, is inevitable.

Business and the 20% plus plutocrats who work in it have the most to lose from the status quo, and the most to gain by beginning to address this problem.  In today’s polarized country, business can become a powerful, constructive force for good.  By moving away from the current cancerous, single-minded shareholder focus, business can adopt reimagined free-market capitalism.  To begin, employees must again become an investment rather than a cost.   In today’s network economy people, not capital, are the real value creators.  Motivating them and allowing them to share in the incremental value of what they produce can and will create remarkable results.  Investing in a business for the long term will make companies globally competitive and create more jobs.  That is the type of free-market capitalism which built America as the strongest military and economic power in the world and it is this kind of capitalism that can do it again.

Running businesses to service multiple stakeholders would put significant amounts of disposable income in the pockets of the vast majority of working Americans.  This would then create more consumer demand and sustainably grow GDP.  Those in today’s economy who have adopted a shareholder primacy model are not only shirking business’s responsibility to society but also ignoring the fact that returns would improve if they would stop leading for short-term gains.   Research substantiates that claim and many traditional companies are already adopting the practices of a reimagined free market and are thriving: Starbucks, Costco, Home Depot, Delta Airlines and more. The pride of our 21st Century technology winners—the FANG companies, all rejected the shareholder-focused model and are world leaders in the digital age.

We’re failing most of our children, millions of them.  We’re failing the dreams and hopes of too many families and too many of our elderly.  We’re putting at risk our democracy and our institutions.  It’s time to start beating the drums.  It is time for politicians to focus on our real problems and be accountable for their promises regardless of their party affiliation.  It is time for the government to rediscover the common good, civility and collaboration.  It is time for business to lead the way because we can.  Because, to follow the brilliant new world teacher CEO of LRN, Dov Seidman, “the business of business is no longer just business.  The business of business now is also society.”  And finally, it is time for all Americans of voting age to vote and hold those elected officials to their promises of a better America with inclusive growth for all.

Nearly forty years of denial is enough.  It is time to shine the light on the crippling reality of the poor next door.  Yes, that time is now.