In the early 1970s the late Senator Daniel Patrick Moynihan published a book entitled Maximum Feasible Misunderstanding. He wrote about how bureaucrats in Washington with the best of intentions to construct policies and programs to assist the poor in communities like Harlem, South Central Los Angeles, and elsewhere never felt the need to go into those communities and find out from the residents just what their needs were. As a result, programs like the War on Poverty and Great Society were doomed to failure.
The bureaucrats in Washington, after all, were experts. And who better than they would know what the poor need? Surely not the poor. Obviously nothing has been learnt from that episode. Elites, who think they know it all and understand better than the masses what is good for them, continue to make policy. Economic policy continues to be made by elites who fail to understand how those policies may adversely affect ordinary, and in many cases not so skilled, workers.
Let’s consider the current global economy which is essentially bifurcated into a highly skilled and well paid economy at the top of the distribution and a poorly skilled and poorly paid one at the bottom. In minds of neoclassical economists, this is simply the natural order of things. The old and obsolete are replaced with the new and technologically more advanced. In other words, this process known as “creative destruction” is due to the march of technology and is considered to be progress.
The same economists, many of whom call themselves “progressives,” truly consider this process to be good even though it results in massive economic dislocation. The masses, in other words, some of whom are referred to by the elites as deplorable, suffer dislocation. They simply want their jobs back. The last thing they want to hear from elites is that they should simply get used to it.
Similarly, progressives tell them they should get used to making their living in a new green energy economy because we need to get away from fossil fuels. Maybe we do for the sake of the environment, but again it is not what those who have already suffered much from economic dislocation want to hear. Again, the elites are tone deaf to the plight of the traditional working class.
Perhaps where the elites are most tone deaf to the plight of the working class is in the area of wage growth and trade. When it comes to wage growth, the neoclassical model assumes that a growing economy will ultimately lift wages. There may be some truth to this if growth results in more openings than workers to fill them. Pure free marketeers too often maintain that in a growing economy, a minimum wage is not only unnecessary, but counterproductive.
Wages will rise naturally, and indeed they may if workers have a set of skills that employers particularly need. But if there is an oversupply of low-skilled workers, they won’t rise so quickly. The low-skilled worker knows what s/he needs: more income. Again, the last thing these workers need to hear is that they should go back to school to develop the skills in order to be able to command higher wages. Once again the elites are tone deaf and one might rightly say this is an example of maximum feasible misunderstanding.
On the contrary, these workers need labor market institutions to bolster their wages. First and foremost, they need their low-skilled service jobs to be redefined as the occupations of the new middle class that only labor market institutions like unions and a minimum wage can accomplish. It was unions during the late Nineteenth and early part of the Twentieth centuries that afforded dignity to low-skilled assembly line workers in factories. It was through unions that these otherwise low-wage, low-skilled jobs were transformed into middle class jobs.
A broader application of the union movement could create a new middle class out of otherwise low-skilled workers in the service economy. It is all very good for progressives to show their compassion for the poor, but they really need to talk about the middle class and why labor market institutions — the minimum wage in particular — could be beneficial to the middle class. Again, we have another case of maximum feasible misunderstanding because all too often progressive elites see no need to talk to the working class to find out what they need.
When it comes to trade, economic elites have literally been out to lunch for a long time. There is no question that free trade grows a domestic economy. An economy that does not export good ultimately stagnates. Of course, if we want to export goods, we have to be willing to import them too. Adam Smith famously observed that free trade would be essential for a country to become wealthy, or “opulent” in his words. Free trade, as we have seen, especially when not all countries play by the same rules, only fuels economic dislocation in a global economy.
Workers who are displaced don’t want free trade; they want protectionism. That is, they may want their jobs to be protected through tariffs. But again, that approach only leads to trade wars, which can ultimately slow down economic growth. Neoclassical economists have long been committed to free trade, but of course they never felt the need to talk to those who suffer the dislocation due to free trade. So it would again appear that we have a case of maximum feasible misunderstanding.
And yet, it isn’t just a question of imports and exports, it is ultimately about the effect that free trade has on wages in a global economy. In order to compete in a global economy, wages really have to fall so that our industries will be competitive. Moreover, regulations that impose a cost also need to be scaled back. When politicians, many of whom consider themselves to be part of the progressive class, allow minimum wages to stagnate and attempt to create favorable business climates in the name of attracting investment, they are in their race to the bottom hurting the middle class.
Again, these public officials relying on the elitism of neoclassical economists do presume to know what is good for everybody else. Of course since they know what is good for everybody else, they don’t need to talk to those whom they are supposed to be serving. The result? You guessed it: maximum feasible misunderstanding.
To talk about maximum feasible misunderstanding is to suggest that the elites just don’t get it because they are tone deaf. That is, they are simply incapable of understanding those who exist in a different realm. And yet, that may be too generous to today’s elites who appear to willfully not care about those occupying a different realm because they consider themselves to be so morally superior. Is it any wonder, then, that the 2016 presidential election resulted in Donald Trump becoming president? Given what appears to be willful maximum feasible misunderstanding, it may well be the case that 2016 repeats itself.