Citizen Action Monitor

US looking more and more like a developing country, says MIT prof

80 percent of population in debt, anxious about job security, besieged by crumbling infrastructure.

No 1944 Posted by fw, April 27, 2017

Professor Peter Temin

“America is regressing to have the economic and political structure of a developing nation, an MIT economist has warned. Peter Temin says the world’s’ largest economy has roads and bridges that look more like those in Thailand and Venezuela than those in parts of Europe…. The economist describes a two-track economy with on the one hand 20 percent of the population that is educated and enjoys good jobs and supportive social networks. On the other hand, the remaining 80 percent, he said, are part of the US’ low-wage sector, where the world of possibility has shrunk and people are burdened with debts and anxious about job security.”Chloe Farand, Independent (UK)

Professor Temin says that education is the solution to offer everyone in society better opportunities and calls for investments in public schools and public universities.

However, time may not be on America’s side. As professor Jeffrey Sachs explains, Trump’s embrace of economic ignorance could lead to disaster. Trump fails to understand that the reason for America’s lagging economic growth is, in large part, driven by decades of low domestic savings and investment rates. Moreover, his plan to cut federal taxes further may be popular but it, too, will be ruinous.

Below is a repost of a short article published by the Independent (UK), summarizing professor’s Temin’s thesis. And at the end of this post is an embedded 12-minute video in which he elaborates on the reasons for the stagnation of the US economy.

Alternatively, to read the article on the Independent’s website, without the video, click on the following linked title.

Peter Temin is an economist and economic historian, currently Gray Professor Emeritus of Economics, MIT and former head of the Economics Department.

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US Has Regressed To Developing Nation Status, MIT Economist Warns by Chloe Farand, Independent, April 20, 2017

Peter Temin says 80 percent of the population is burdened with debt and anxious about job security

Skid Row in downtown Los Angeles

America is regressing to have the economic and political structure of a developing nation, an MIT economist has warned.

Peter Temin says the world’s’ largest economy has roads and bridges that look more like those in Thailand and Venezuela than those in parts of Europe.

In his new book, The Vanishing Middle Class, reviewed by the Institute for New Economic Thinking, Mr Temin says the fracture of US society is leading the middle class to disappear.

 

Volunteers from the Midnight Mission help feed the homeless and poor during its annual Easter/Passover celebration at Skid Row in Los Angeles, California (Getty Images)

Volunteers from the Midnight Mission help feed the homeless and poor during its annual Easter/Passover celebration at Skid Row in Los Angeles, California (Getty Images)

The economist describes a two-track economy with on the one hand 20 percent of the population that is educated and enjoys good jobs and supportive social networks.

On the other hand, the remaining 80 percent, he said, are part of the US’ low-wage sector, where the world of possibility has shrunk and people are burdened with debts and anxious about job security.

Mr Temin used a model, which was created by Nobel Prize winner Arthur Lewis and designed to understand developing nations, to describe how far inequalities have progressed in the US.

When applied to the US, Mr Temin said that “the Lewis model actually works”.

Homeless men try to stay warm in a Manhattan church on an unseasonably cold day in New York City (Getty Images)

He found that much of the low-wage sector had little influence over public policy, the high-income sector was keeping wages down to provide cheap labour, social control was used to prevent subsistence workers from challenging existing policies and social mobility was low.

Mr Temin also claims that this dual-economy has a “racist” undertone.

“The desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.

“We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people,” he writes.

Commenting on Mr Temin’s findings, Lynn Parramore, senior research analyst at the Institute for New Economic Thinking, writes: “Without a robust middle class, America is not only reverting to developing-country status, it is increasingly ripe for serious social turmoil that has not been seen in generations.”

Female jail inmates are chained together as they bury cadavers at Maricopa County’s pauper’s graveyard in Phoenix, Arizona (Joe Raedle/Liaison)

Mr Temin says that education is the solution to offer everyone in society better opportunities and calls for investments in public schools and public universities.

He says: “Knowing how to think, how to get on with people, how to cooperate. All the social skills and social capital … [are] going to be critically important for kids in this environment.”

SEE ALSO

What the ‘Dual Economy’ Model for Developing Countries Reveals About Today’s America Address by MIT’s Professor Peter Temin, January 3, 2013. — Addressing the Institute’s economics of race conference, Temin sees the US economy as bifurcated along lines analogous to the situation described in developing world economies by W. Arthur Lewis. Access to education is the key to social mobility into the high-tech sector, but plutocratic public policy is choking off desperately needed investment in public education.

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