Is Our Economy "Strong"?

There seems to be two basic approaches to measuring economic strength in the US: the Dow Jones Industrial Average for those with investments and employment conditions for those living off their wages.

For those who can live off their investments and with the Dow at an all time high, recent times are high times, and the credit is largely attributed to the Bush tax cuts. So much so that Mitt Romney is currently touring the TV talk shows threatening Americans with the specter of a Democratic president pushing through a huge tax increase in 2010 that kills economic growth. This same argument was recently made by New York hedge fund managers who have threatened to take their money to the Cayman Islands if they have to pay taxes on the same basis as most Americans. Clearly the economy is being good to these groups, but does that make it "strong"?

For more and more wage earners the answer would be 'no", because they haven't been treated well. Many of the same forces driving the Dow higher are also reducing the number of well paying jobs, increasing the ranks of the poor, and shrinking the middle class. Health care continues to less and less affordable, and the financial risks of a major illness are on the rise. Productivity has risen, but real wages have not.

So which measures should we use to determine how we are doing? Let's look at the long term trends and see where they take us. Currently the economy allocates an increasing share of our wealth to an ever smaller percentage of the population while the vast majority of share a shrinking part of the economy's pie. Over the long run this is a recipe for producing the next Brazil or perhaps India: countries with a fabulously wealthy ruling class and most of the population living near or in poverty. A better direction would be one that returns to a situation more like post WWII America when the American dream was alive and well. People worked hard, shared to varying degrees in the results, but generally we all rose together. Education and housing were affordable, health care was available, and retirement was something to be looked forward to.

Countries like China, Singapore, Taiwan, and India which strive to emulate our success are working hard to develop and sustain their middle classes, increase the education of their work forces, and improve working conditions. They see the US of the 50's as a model for achieving a strong economy. It's ironic that in the US, we seem to have abandoned our own model of success and are aspiring to become what these countries are hoping to escape.