JUDY WOODRUFF: Next, It’s a tradition as old as Alexis de Tocqueville, friendly foreign voices commenting on the United States. But this time, a British author is much more pessimistic.
Margaret Warner has our book conversation.
MARGARET WARNER: For seven years, Edward Luce has reported on the United States for the British and global audience of The Financial Times. He’s now turned his insights into a book portraying an America that’s falling behind and seems unable or unwilling to meet its challenges going forward. It’s entitled “Time to Start Thinking: America in the Age of
We met at Luce’s Washington home to talk about how he came to this gloomy appraisal.
So what’s at the heart of this for America?
EDWARD LUCE, author: I think that the heart of this is the health, the condition of the middle class, because I think the middle class, the greatness of the American middle class explains the greatest generation of the 20th century, its rise to being the first — the world’s first mass middle class in the mid-20th century was key to America’s success.
I also think a strong middle class is key to a democracy, not just to an economy. And that is breaking down and has been breaking down, which gives such cause for concern over a long period of time, if you look at the pay rates, if you look at the security of the middle class, and if you look at their ability to move up to different income levels.
So that core American value of income mobility is now something where you’re doing worse than other countries.
MARGARET WARNER: You had a particularly poignant story about a family called the Freemans in Minnesota and how they exemplify what the middle class is going through.
EDWARD LUCE: Yes. They both work full-time, day and night.
He, Mark Freeman, has three jobs. They have a son with severe autism. And they volunteer. They’re the sort of backbone American neighborhood types who volunteer for the little league, to coach the little league, neighborhood watch, all sorts of things they’re plugged into.
And their plight, the fact that they work harder and harder and harder and get less and less and less in a neighborhood that was once very decent and civic, and has now become quite dangerous, struck me as emblematic of what so many middle-class families are looking at.
MARGARET WARNER: So what about all the new jobs that are being created as we do come out of this recession?
EDWARD LUCE: They’re much less well-paying than the jobs they’re creating. They’re much less likely to come with health care benefits and retirement security. And they’re much less likely to involve on-the-job training.
These aren’t necessarily the cognitive, cerebral jobs that economists told us, this brave new world America becoming a service economy, an intellectual property economy, while others do the manufacturing. These jobs don’t really fit into that, the jobs as food preparers. These are not the kinds of jobs that are going to tackle America’s trade deficit with China or others.
These are not the kind of jobs that are going to build a new middle class.
MARGARET WARNER: Yes. The part of the book that I found perhaps most discouraging was the chapter you had about innovation, because in America we always think, well, we can invent the next new thing. Innovation is always our ticket to the next level.
And you find that stagnating?
EDWARD LUCE: I find aspects of it stagnating.
I mean, social media? No. Googles and the Facebooks and the Twitters, it’s very hard to imagine another economy producing those. But innovation I focused on as a core concern, because it’s America’s “get out of jail free” card. It’s what people always say. OK, Washington’s dysfunctional, okay, the middle class is hollowing out, but we are unrivaled and unmatched as the world’s leading innovator.
And that remains true, but it remains less true than it was 10 years ago, considerably less true in some sectors.
MARGARET WARNER: What did the people involved in innovation, both on the capital end and also the innovating end, tell you about what the problem is?
EDWARD LUCE: They said it’s very difficult to bring a small company to market nowadays.
America’s had this extraordinary trend in the last 10 years where you have seen your — the number of listed companies shrink. It’s gone down by about some 30 percent, which is unprecedented. That’s never happened before.
And one of the reasons for that is, it’s very hard to find patient capital anymore, people — old-fashioned venture capital investors who have got patience, they believe in the product that this company is going to make. The industry is essentially being taken over by investment bankers.
There’s been what some have called a financialization, a Wall Streetization of the American economy with much shorter-term metrics. There are entrepreneurial opportunities mushrooming up all over the world. So it’s partly about the rest of the world. I don’t think America’s losing its ability to innovate, but I do think it’s overwhelming innovative advantage is no longer to be taken for granted.
MARGARET WARNER: Do you see what’s developing here akin to what happened — as a Brit, do you see this — to Great Britain more than 100 years ago, really, at the turn of the 19th century — turn of the 20th century?
EDWARD LUCE: There are very, very interesting similarities with what happened at the dawn of the 20th century.
Britain had a very big debate over the rise of America, the electrification, the internal combustion engine. Edison’s America was really beginning to show up Britain, as was Bismarck’s Germany. I think that when you’re number one and when you have been number one for many decades, others emulate you.
You don’t emulate them. That was the conclusion of the British debate. And I fear that that’s very much still the default mind-set in Washington, D.C. It’s less of the automatic defense mechanism than it was before Lehman Brothers melted down, but it’s still very much, look, we have got out of trouble before and therefore we are going to get out of trouble again.
MARGARET WARNER: De Tocqueville said America was great because she could always repair her faults. And you say America has — is losing its ability to tackle its problems.
EDWARD LUCE: That’s the sort of spirit of what troubles me, which is that this American sense of pragmatism — pragmatism is a word invented by an American. It describes, as Tocqueville did, the American philosophy, which is practical, which is resolving actual problems, not in theory, but in practice.
And I think, by that yardstick, by that measure, that de Tocquevillian spirit is missing in action, at least in Washington, D.C.
MARGARET WARNER: So this is an obvious question, but let me end by asking it anyway. Did you conclude these really two years reporting on this optimistic or pessimistic about America’s prospects?
EDWARD LUCE: I am pessimistic about its ability to stop others from growing, and it’s going to mean America’s share of the global economy is going to keep falling. It is now about a quarter. It was about a third of the world economy just 10 years ago.
So that’s not going to change. But America always has the capacity to surprise. I can’t put my finger on what it will be or when it will be, but America isn’t going to continue on this trajectory. And if it does continue on this trajectory, namely taking steps that make that relative economic decline worse, rather than responding pragmatically, if it does continue on this trajectory, then things are going to get a lot worse.
I don’t believe Americans will stand for that. I just don’t quite know how they won’t stand for that.
MARGARET WARNER: Out there reporting, did you find any evidence of that?
EDWARD LUCE: I find evidence the whole time of Americans who have a kind of self-fulfilling optimism, which is always very refreshing to a European, and particularly to a Brit, because for us it’s cultured to be pessimistic.
And I want to make a big distinction between that and what my — I think my book is a very hard-nosed analysis, rather than a cultured look at America. But I find that the optimism we sometimes come across that sometimes might be way improbable can sometimes be self-fulfilling, because it creates energy, whereas cynicism is de-energizing.
That’s something that America has seen a decline of, but it’s still way more noticeable here, in spite of the fact people are more pessimistic. It’s still much more in evidence amongst Americans than any other country.
MARGARET WARNER: Ed Luce, thank you.
EDWARD LUCE: Thank you.