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Elizabeth Warren’s Bold Ideas Don’t Go Far Enough

For decades, US median household wages have barely budged, and politicians on both the left and right have lost sight of what drives a modern economy. What America needs are policies to shape the direction of technological development and restore workers' bargaining power.

CAMBRIDGE – Forget the stock market and the low unemployment rate: the US economy isn’t working. Productivity growth, a key gauge of economic health, remains historically low. Median wages, an indicator of middle-class living standards, have barely grown in four decades. Inequality is high, and market power is increasingly concentrated in the hands of just a few companies. Americans used to dismiss Europe as the land of government-protected, noncompetitive firms. Now, European markets in most industries appear more competitive than those in the United States.

The complacency of America’s political class has exacerbated these problems. For years, two trite approaches have dominated economic-policy debates. The right has clung to a belief in “trickle-down” growth, which translates into doing whatever is good for business, because corporate profitability will boost investment, employment, and wages. But it turns out that serving established corporations’ interests and eschewing regulation does not encourage competition or spur the kind of innovation needed to boost productivity growth. Siding with bosses at the expense of workers and consumers may be good for shareholders, but it doesn’t deliver healthy wage growth for average Americans.

The left, meanwhile, has focused primarily on redistribution, most recently seizing on proposals for a wealth tax with which to finance more generous transfers or even a universal basic income. There is little doubt that the US economy needs more infrastructure investment, a better social safety net, and stronger anti-poverty measures. Taxes on the rich have reached record lows at a time when the US is in dire need of more federal-government revenue and spending. Yet, historically, no society has achieved broadly shared prosperity from redistribution alone.

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