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What Happens to a Dream ‘Betrayed?’ Authors Blame Trade for Middle Class Demise

October 16, 2012 at 12:00 AM EDT
Economic correspondent Paul Solman talks to the authors of "The Betrayal of the American Dream," Donald Barlett and James Steele, who say the drive for free trade has exported so many jobs to China, Brazil and India that American workers may become irrelevant to their own economy, just as other countries gain a middle class.
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JUDY WOODRUFF: Next: the state of the middle class and the connection to trade and wages.

We have been spent much time on the program chronicling the growing problems facing middle-class Americans. Tonight, we look at some explanations offered for that in a new book, “The Betrayal of the American Dream,” by investigative reporters Donald Barlett and James Steele.

Our economics correspondent, Paul Solman, sat down with them, part of his ongoing reporting Making Sense of financial news.

PAUL SOLMAN: The Pulitzer Prize-winning Barlett and Steele first chronicled growing income inequality at The Philadelphia Inquirer and later at “TIME” magazine. They now work for upscale “Vanity Fair.”

But it was “Advertising Age,” the middlebrow Bible of the ad industry, that they quoted at the start of our interview.

DONALD BARLETT, Co-Author, “The Betrayal of the American Dream”: The “Advertising Age” has written off the middle class in this country. They say the age of mass affluence is over. And now you’re going to have to learn to cater to the super rich and the affluent in other countries, because the middle class in China, Brazil, India, that’s the source of the coming wealth, not the U.S. middle class.

PAUL SOLMAN: Barlett and Steele believe that the real culprit is the theory of free trade, as promoted by economists like Harvard’s Robert Lawrence, a former Clinton economic adviser, to whom we put the question, what is the big idea?

ROBERT LAWRENCE, Harvard University: Trade allows countries to specialize in the things that they can do well. When they meet the test of the market, they raise living standards. they improve product quality. They improve technology. They improve choice.

DONALD BARLETT: On the surface it sounds great, open trading, other countries. What’s to be against? The problem is, when the theory was developed back in the early 1800s, it was envisioned as countries operating comparably.

The incomes of the United States and China are so disparate that it would never work. It’s always going to be cheaper to go over to China to build what you want to build.

PAUL SOLMAN: As manufacturing jobs migrated aboard, Barlett and Steele point out, the Middle American standard of living sank steadily.

JAMES STEELE, Co-Author, “The Betrayal of the American Dream”: Free trade was always presented on the basis that everybody will benefit. You may lose your job, but you will get some other job. And for the most part, people said, let the dirty jobs go. Let those manual labor jobs go.

PAUL SOLMAN: Right.

JAMES STEELE: If you’re going to get the smart jobs in this country, the brain power, and it is not working out as everybody said it would, because now many of those jobs are starting to go offshore faster than the old manufacturing jobs did.

PAUL SOLMAN: The job drain, especially to China, has become a staple of both presidential campaigns.

NARRATOR: Under Obama, we have lost over half-a-million manufacturing jobs. And for the first time, China is beating us.

NARRATOR: Romney’s never stood up to China. All he’s done is send them our jobs.

PAUL SOLMAN: And both candidates are speaking to eager ears. In a recent Pew survey, seven in 10 Americans called the loss of U.S. jobs to China very serious. But while China as the culprit may play in Peoria, Robert Lawrence says it’s a bum rap.

ROBERT LAWRENCE: Look, the role of trade and the role of China has been vastly exaggerated as a reason for the declining jobs in manufacturing.

If you go back to 1950, long before China was an issue or even the United States was engaged in much international trade, you will see that manufacturing jobs were declining as a share of total employment. We’re losing jobs in manufacturing basically for the same reason as we lost jobs in agriculture. We became a lot more productive at growing food. And as a result, we needed fewer farmers.

PAUL SOLMAN: Today, we need fewer factory workers. But, Barlett and Steele insist, corporate America at the very least speeded up the process in order to maximize profits for their investors and pay for themselves.

DONALD BARLETT: The real bottom-line question is, what kind of a society do we want? Do we want a society built on the principle that the only thing that matters is the lowest possible price or a society built on the principle that everyone should have a living wage?

And those are going to be two very different societies. And this goes back again so what we’re talking about. The people up here, they don’t want everyone to have a living wage.

PAUL SOLMAN: Why don’t they?

DONALD BARLETT: Because they make more money the other way.

PAUL SOLMAN: Not in the long run. I mean, if you have lots of Americans who are out of the game entirely who can’t buy their products and so forth…

DONALD BARLETT: Well, because they’re replaced by a Chinese middle class, Brazilian middle class, Indian middle class.

PAUL SOLMAN: So, you actually think we could have an economy in this country in which lots of Americans would simply be not part of the economy at all?

DONALD BARLETT: Irrelevant.

JAMES STEELE: You know, they will have jobs, but these are going to be jobs that don’t pay much. I mean, and that’s the trend you see already.

PAUL SOLMAN: What can you really do about trade?

JAMES STEELE: Basically, what — basically what we mean on trade is in fact we have to get a little tougher.

And we’re just suggesting that when there are obstacles, we get a little tough with people, impose some duties if you have to.

PAUL SOLMAN: Duties meaning?

JAMES STEELE: Tariffs.

PAUL SOLMAN: Protective tariffs.

JAMES STEELE: Yes. Absolutely.

DONALD BARLETT: Exactly. Exactly.

JAMES STEELE: You don’t have to do it on every good. You don’t have to do it on every product. You don’t have to do it on every country, but when something is at stake, stand up for things.

PAUL SOLMAN: While most economists would scoff at such talk, President Obama has been getting tougher, filing a trade case last month against Chinese car exporters the same day he hit the hustings in blue-collar Ohio.

BARACK OBAMA, U.S. President: We have brought more trade cases against China in one term than the previous administration did in two. And every case we have brought that’s been decided, we won.

PAUL SOLMAN: And Mitt Romney promises that, if elected, he will be even tougher.

MITT ROMNEY (R), Presidential Candidate: When China cheats in trade and steals our jobs unfairly, we’re going to finally say no and take them — make them accountable.

(CHEERING AND APPLAUSE)

PAUL SOLMAN: But to both candidates and both authors, Professor Lawrence counsels caution.

ROBERT LAWRENCE: We need to get tough in opening foreign markets and signing trade agreements that increase our exports. But if we start to discriminate against foreigners with tariffs, they will do the same to us, and what we will end up in is a giant trade war, in which we will all be losers.

PAUL SOLMAN: What’s more, say economists, what America’s best at is high-tech, biotech, innovation. That’s where the future jobs are, not on the factory floor.

JAMES STEELE: An awful lot of people in manufacturing are saying, we need to preserve and enhance this, because it’s at the heart of a lot of innovation. You can’t just have your designers turning the stuff over to robots and things of that sort. You have still got to have human beings involved in this process.

And the closer you have that process together, the better your end product is. This is the great contrast with a country like Germany or Switzerland, which has these very sophisticated apprenticeship programs where people are trained for years and years. We need to put more of an emphasis on that in this country.

PAUL SOLMAN: But you’re suggesting apprenticeships, government programs. And many, many people in this country say, hey, the last thing we need is more government.

JAMES STEELE: Maybe things will have to get a lot worse before people realize that there are some things, some positive things that government can do. These things didn’t use to be so partisan in this country. We used to be able to get together and do things for the benefit of everybody. And we hope one of these days we’re back to that. We’re definitely not there now.

PAUL SOLMAN: DONALD BARLETT, Jim Steele, thank you very much.

DONALD BARLETT: Thanks.

JAMES STEELE: Thank you.