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Morici: Occupy Wall Street Puts Nation on Notice

Occupy Wall Street may be out of Zuccotti Park but Americans ignore its message only at their peril.

Occupy Wall Street
Leslie Gersing for CNBC.com
Occupy Wall Street

Dispossessed by police from prominent venues around the country, the forces that inspired mass, albeit unseemly demonstrations have not abated. America is rapidly fracturing into two nations—affluent players in the global economy and a growing mass facing diminished circumstances for themselves and their children.

If forces marginalizing millions are not addressed, America is headed for much worse than tent cities and baths in parks. Economic bifurcation into the super affluent and the poor will erode the institutions and values that bound together immigrants from many heritages, faiths and tongues into a single nation.

The Census Bureau reports about 100 million Americans—one in three—live in or perilously close to poverty. Many are working but rely on food stamps, government agencies and charity to feed, clothe and provide medical care to their children. Most have too few resources to see a dentist regularly or even subscribe to a daily newspaper. They rely on cars, often because decent housing is much too costly near their work, and are forced to live too inconveniently from grocery stores, other services and multiple jobs to practically rely on public transportation.

Hardly all marginalized Americans are recent immigrants with poor English proficiency. Many are high school graduates or have been to college but can’t land a decent, permanent job that permits skills building and initiates the climb to middle class affluence. Many are older workers, whose positions permanently disappeared during the Great Recession.

The economy has changed and simply no longer needs these workers, and that is nothing new. Stagnant wages, declining living standards and a shrinking middle have been in the headlines for more than a decade.

Globalization—transcontinental commerce and high-speed communications—and labor saving technologies that displace even well-educated professionals in traditional industries are creating only limited numbers of new opportunities in knowledge-based and creative activities—industrial design and software, high-tech manufacturing, sophisticated finance, national media, health care, and the like. Getting a first opportunity for a rewarding career often requires focused skills acquired at elite universities, and to progress and stay on the ladder, sophisticated career management and some good luck.

For the rest of America, global competition, communications technologies and essentially unchecked immigration have hammered down wages and winnowed opportunities in once decent paying occupations—for example, ordinary line work in manufacturing, middle management and sales, and writing for a daily newspaper. So much more can now be outsourced and accomplished on the internet with inexpensive software or performed by semi-skilled immigrant workers.

Sending more Americans to college is not the answer—degrees in the liberal arts are simply not as valuable today as 25 years ago, and many students are not suited to engineering and other technical disciplines. The workforce is well overstocked with business school graduates. The problem is not too few educated Americans but too few good jobs for most of them to do.

Heavier taxes on the wealthy to redistribute income won’t help. Many will take their work and income offshore but more importantly, the U.S. economy is shrinking. Not only is income increasingly less equally distributed, but per capita income is falling at an alarming pace. Simply, the pie the government can carve up is shrinking.

Germany and China, two of America’s toughest competitors, recognize the challenges posed by globalization and manage them. They engage in mercantilist policies—undervalued currencies and industrial policies that seek out high paying jobs for ordinary people through exports. And those jobs are frequently mined from America’s Heartland.

Certainly, America doesn’t want a protectionist world, but the United States can’t always dictate the terms of competition and continue to stand idle without more effective responses than bailouts for General Motors, subsidies for Solyndra and Social Security tax holidays, all paid by borrowing from China.

The United States must force open foreign markets or protect its own, or it will perish.

It is a tough world beyond the water’s edge. Either Americans learn to compete in the world as they find it or America will be no more.

Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.