How Americans Will Adapt to Lower Living Standards
By Rick Newman | Daily Ticker – Tue, Oct 29, 2013 1:05 PM EDT
Get used to beans.
That’s one suggestion in Tyler Cowen’s new book, Average Is Over: Powering America Beyond the Age of the Great Stagnation. Cowen creates a stark image of a future U.S. economy in which most people either rocket toward the top or drift toward the bottom. A thinning middle class doesn’t mean people can’t work their way up any more, but it does mean it will be harder to muddle along with marginal skills or a soft work ethic, since a hollowed-out middle will no longer be able to shelter those who don’t have what it takes to make it to the top.
Americans will adapt. “Many of society’s lower earners will reshape their tastes...toward cheaper desires,” Cowen writes in Average Is Over. That’s where the beans come in, since they provide all the nutrition of fancier food at a fraction of the cost. “Don’t scoff at the beans,” Cowen encourages readers who might feel unsettled by his dystopian view of America’s future. Cooked with freshly ground cumin and pureed chili peppers, he insists, they can be quite tasty.
As Cowen explains further in the video above, the United States is probably unlikely to return to the easy prosperity of the post-World War II era, which swelled the middle class and allowed millions of families to build wealth and save for retirement with little more than a strong back and a will to get ahead.
In econospeak, Cowen believes the economy is undergoing “structural” change that’s in the process of creating a new normal, with new classes of winners and losers. Others are more inclined to see “cyclical” change caused by the recent recession, with some lost jobs coming back and life eventually returning to familiar patterns. If we’re in the midst of a mere cyclical change, however, the cycles are taking an awfully long time to run their course.
Cowen says it will be tougher to get ahead in the future, for three reasons familiar to anybody who’s been paying attention to the shifting fortunes of U.S. workers. First, companies are much more careful these days about taking on workers and committing to the cost of labor, benefits, and the problems sometimes caused by humans on the payroll. Second, globalization means there’s more international competition for jobs at all levels. Third, automation allows many companies to replace people with technology.
“The old America we knew, where everyone’s living standard doubled each generation, will probably be a thing of the past for a lot of people,” Cowen says.
As uncomfortable as it may sound, there are plenty of ways for Americans to adjust to the Darwinian economy Cowen envisions. They can move to cheaper, more affordable areas and use Skype or other Internet innovations to telecommute and keep in touch with family. More Americans will become freelancers and “petty entrepreneurs” with jobs akin to those considered desirable in many developing countries. More ”threshold earners” will content themselves with earnings just high enough to get by. Americans will also find new ways to eliminate a lot of waste, becoming thriftier in the process.
There will be new winners, too, as the soaring fortunes of Facebook (FB), Twitter and many new web companies demonstrates.
“There will be a lot of opportunities for people who really have the desire to seize them,” says Cowen. For everybody else, it would probably be a good idea to get familiar with cumin and chilis.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
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