Meanwhile, as Nobel laureate Michael Spence has documented, 90 percent of the 27 million jobs created in the US in the last 20 years have been in the low-wage “non-tradable” sectors of retail sales, health care, and government service.
The great danger to the American creed of opportunity is that this combination of wealth concentration, industrial demise, and technological displacement will lead to a closure of upward mobility. As the plutocrats seek to defend their privileges through the political influence of money and perpetuate their elite status by monopolizing access for their children to the Stanfords, Harvards, and Princetons of higher education, everyone else will be shut out from ever getting to the top.
Without doubt, American entrepreneurial energy will seek to break through this tendency toward closure by the plutocrats at the top. Government policies that provide incentives (like Germany) to retain or expand manufacturing in the US are also critical to stemming the growing income gap.
But, as all economists agree, the key variable in income differentials is the level of education. Only a highly skilled and imaginative workforce will be able to harness the digital revolution’s creative-destructive dynamic so that high-paying jobs follow rising productivity.
Investment in education, training, research, and development, however, will require wresting resources for the future from an economy not only skewed toward the plutocrats well positioned to protect their interests but also weighed down by the present costs of past promises through Medicare, Social Security, and other benefits.
In short, any attempt to restore the aspirational faith in mobility and opportunity will necessarily pit the top and the past against the future. What has been made clear by the re-election of President Obama – and the continuing battle over the "fiscal cliff" – is that most Americans are in no mood to sacrifice their promised social benefits on behalf of investment in the future if the plutocrats are left off the hook.