Perhaps the most articulated concern of the Occupy Wall Street movement is the degeneration in the income distribution among Americans. It's a valid concern, even if solutions are elusive.
Any innovative wave results in a shift in income distribution. The Industrial Revolution shifted the means of production from the elite to the industrialist. The increase in productivity concentrated wealth on the world's first nouveau-riche. Peasants moved from rural to urban serfdom. Their collective frustration fomented revolt, first through the words of Karl Marx, then through Lenin and Stalin.
Many who were fortunate enough escaped to America, a land of opportunity where heroic Horatio Alger types could pull themselves up by their bootstraps. The American Dream was that anyone could go from poverty to prosperity through wit and hard work.
This dream worked for generations. With each new innovation came a new cadre of millionaires — and prosperity for the working class who powered the factories.
Henry Ford had an understanding of the need to employ workers at a living wage that could allow them to purchase the products they made.
Then, something changed. First, our middle-class affluence induced us to prefer to be paid more and work less. Hard jobs became undesirable, and were farmed out to guest workers and illegal aliens.
Innovations in manufacturing allowed 10,000 workers in plants to be replaced by 1,000 workers and 1,000 robots. The amount a worker could produce went up dramatically, but much of those gains went to the corporations that purchased the machines.
This dramatic increase in productivity and profits but with stagnant wages had its effect on our national distribution of income. The rich got richer while middle-class incomes rose at a much slower pace. Opportunities for the least-skilled workers declined.
One cannot contain human ingenuity.
Instead, we must figure out ways to harness ingenuity for the good of all. The enlightened wealthy know this. An extremely unfair distribution of income dries up their markets and makes the vast middle class unhappy and unpredictable. The Occupy Wall Street movement is a symptom rather than a disease.
We can ignore the symptoms but only at our peril. Unless we redress the widening income gap, the frustration will only grow. The challenge is to address the problem head-on.
We can do so just as we did in the middle of the 19th century. Rather than ask the innovators to invent with one hand tied behind their back, we should give the middle class increasing power in the marketplace by increasing productivity.
The United States leads the world in productivity because this is the home of the knowledge economy. To maintain this advantage, we must erase the lag of the education of our youths compared to other countries and then reverse this relationship. Our children must be the best educated, most inventive and most technically proficient on the planet if we expect to maintain our global advantage.
We must also create an economy that is nimble, innovative and adaptable. Unfortunately, our own economic institutions often keep us stuck in place. Those with underwater mortgages are unable to move where the jobs are, and those with medical conditions won't leave an inferior job for a superior one for fear of losing their medical coverage.
We seem to underestimate our ability to teach old dogs new tricks and sometimes respond by coddling the laziest instead of making them more productive.
We leave unregulated new industries that claim to make something out of nothing, while staying one step ahead of the regulators.
Perhaps, worst of all, we allowed a political system to emerge that is well-paid to maintain a status quo designed to benefit those with the most economic power.
These flaws are increasingly obvious, and they give rise to the Occupy Wall Street movement.
However, some of the proposed solutions are problematic because they throw the baby out with the bathwater. What we need is a real discussion of solutions that keeps the best and reinvents the rest. We must ensure we don't take away the incentive for innovators to work without increasing the incentive for the less ambitious to avoid work.
That is going to take some creativity, once the shouting and politicking has stopped.
Colin Read chairs the economics and finance department at SUNY Plattsburgh. Continue the conversation at www.pressrepublican.com/0216_read.