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A recent cover story in The Economist (a business-oriented weekly from England) titled “Inequality and the American Dream” may finally help us all see – and hopefully prevent – a looming American economic crisis. Economic inequality isn’t just about workers and families, but the Economist’s attention is evidence that there is much more at stake. The growing economic divide is a fundamental dynamic that will weaken our position as a global economic power.

According to the Economist,

  • The gap between rich and poor is bigger than any other advanced country.
  • Even though productivity of American workers has been increasing, those gains are lifting fewer boats and “the fruits of those productivity gains have been skewed towards the highest earners and towards companies, whose profits have reached record levels as a share of GDP.”
  • Wages for middle income workers have stagnated while incomes for high-income workers have soared. And at the same time the cost of living – housing and transportation – have increased at a rapid clip.

In fact, it wasn’t always this way. Before the 1980s, rising tides really did lift all boats.

As productivity increased, so did incomes for the majority and we created the largest middle class in world history.

The bottom line is that we are becoming a nation that is increasingly polarized (economically and politically) and where economic insecurity for families is bleeding into millions of American homes.

Economic insecurity isn’t just a political slogan. It’s real for families that want to live in a decent home, save enough to send their kids to college, live a modest middle class life and live without the anxiety of not knowing if you’ll have a steady enough income be secure in retirement.

But this is also bad for the nation. As the ranks of the working poor increases we are losing the productive potential of millions of workers. Struggling from paycheck to paycheck with multiple jobs means that parents don’t spend enough time with the kids helping them through school and it limits their own ability to get more training. You can’t start working your way up the ladder if the first step is under water.

History has lessons for us. Great nations that under invest domestically and overextend internationally always fall. The good news is that if we did it before, we can do it again.

DONALD COHEN

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