The Optimist

Marx Is Back

The global working class is starting to unite -- and that's a good thing.

The inscription on Karl Marx's tombstone in London's Highgate Cemetery reads, "Workers of all lands, unite." Of course, it hasn't quite ended up that way. As much buzz as the global Occupy movement managed to produce in a few short months, the silence is deafening now. And it's not often that you hear of shop workers in Detroit making common cause with their Chinese brethren in Dalian to stick it to the boss man. Indeed, as global multinational companies have eaten away at labor's bargaining power, the factory workers of the rich world have become some of the least keen on helping out their fellow wage laborers in poor countries. But there's a school of thought -- and no, it's not just from the few remaining Trotskyite professors at the New School -- that envisions a type of global class politics making a comeback. If so, it might be time for global elites to start trembling. Sure, it doesn't sound quite as threatening as the original call to arms, but a new specter may soon be haunting the world's 1 percent: middle-class activism.

Karl Marx saw an apocalyptic logic to the class struggle. The battle of the vast mass against a small plutocracy had an inevitable conclusion: Workers 1, Rich Guys 0. Marx argued that the revolutionary proletarian impulse was also a fundamentally global one -- that working classes would be united across countries and oceans by their shared experience of crushing poverty and the soullessness of factory life. At the time Marx was writing, the idea that poor people were pretty similar across countries -- or at least would be soon -- was eminently reasonable. According to World Bank economist Branko Milanovic, when The Communist Manifesto was written in 1848, most income inequality at the global level was driven by class differences within countries. Although some countries were clearly richer than others, what counted as an income to make a man rich or condemn him to poverty in England would have translated pretty neatly to France, the United States, even Argentina.

But as the Industrial Revolution gained steam, that parity changed dramatically over the next century -- one reason Marx's prediction of a global proletarian revolution turned out to be so wrong. Just a few years after The Communist Manifesto was published, wages for workers in Britain began to climb. The trend followed across the rest of Europe and North America. The world entered a period of what Harvard University economist Lant Pritchett elegantly calls "divergence, big time." The Maddison Project database of historical statistics suggests that per capita GDP in 1870 (in 1990 dollars, adjusting for purchasing power) was around $3,190 in Britain -- compared with an African average of $648. Compare that with Britain in 2010, which had a per capita GDP of $23,777; the African average was $2,034. One hundred and forty years ago, the average African person was about one-fifth as rich as his British comrade. Today, he's worth less than one-tenth.

Although many Americans get worked up about absurdly inflated CEO salaries and hedge fund bonuses, a hard economic fact has been overlooked: As the West took off into sustained growth, the gap in incomes among countries began to dwarf the income gaps within countries. That means a temp in East London may still struggle to make ends meet, but plop her down in Lagos and she'll live like a queen. If you're feeling bad about your nonexistent year-end bonus, consider this: Milanovic estimates that the average income of the richest 5 percent in India is about the same as that of the poorest 5 percent in the United States. Like banks and multinationals, wealth and poverty are now globalized. The lowest municipal workers in Europe and the United States are far richer than their counterparts in poor developing countries (even when purchasing power parity is taken into account), and they're almost infinitesimally better off than the majority of people in those countries who still survive off the earnings of small farms or microenterprises.

Sorry, Karl: The simple fact that poor people in Europe and America are in the income elite according to the standards of South Asia and Africa is why the workers of all lands have not yet united. The second congress of the Communist International, in 1920, condemned the despicable betrayal by many European and American socialists during World War I, who "used 'defense of the fatherland' to conceal the 'right' of 'their' bourgeoisie to enslave the colonies." The gathered representatives argued that the mistrust generated could "be eradicated only after imperialism is destroyed in the advanced countries and after the entire basis of economic life of the backward countries is radically transformed."

Yet all that might soon be changing. Globalization may have been the watchword of the 1990s, but it's still a work in progress. As interconnected global markets get ever more interconnected, average incomes are converging. The last 10 years have seen developing countries grow far more rapidly than high-income countries, closing the gap in average incomes. Economist Arvind Subramanian estimates that China in 2030 will be about as rich as the whole European Union today and that Brazil won't be far behind, clocking in at a GDP per capita of around $31,000. Indonesia, he reckons, will see a GDP per capita of $23,000 -- about the same as tech powerhouse South Korea today.

Put simply, this means that within the space of hardly a generation, a good chunk of the world will soon be rich, or at least solidly middle class. According to forecasts I've developed with my Center for Global Development colleague Sarah Dykstra, about 16 percent of the Earth's population lives in countries rich enough to be labeled "high income" by the World Bank. If growth rates continue as they have in the past decade, 41 percent of the world's people will find themselves in the "high income" bracket by 2030. In short, if developing countries continue growing at the rate we've seen recently, inequality among countries will shrink -- and inequality within nations will return as the dominant source of global inequality.

Does that mean Marx was right -- if just a couple of centuries off on his timing? Not exactly.

The reality is that this new middle class will have lives that Victorian-era working-class Brits could only dream about. They'll work in LED-lit shops and offices rather than in dark, hellish mills. And they'll live nearly 40 years longer than the average person in 1848 based on life expectancy at birth. But will they share common cause with their fellow factory workers an ocean away?

Maybe, but not because the barricade is the only option. Marx predicted that the global working class would unite and revolt because wages everywhere would be driven to subsistence. But as wages increase and level out around the world, the plight of the proletariat -- hard work, low pay -- today more than ever means easier work and better pay. And it's bringing hundreds of millions of people, in China alone, out of poverty. Clearly, the communist revolutions of the first half of the 20th century proved far, far worse for living standards than the well-regulated markets of the latter half.

But that doesn't mean Warren Buffett should breathe easily. In fact, it is exactly because the rich and poor will look increasingly similar in Lagos and London that it's more likely that the workers of the world in 2030 will unite. As technology and trade level the playing field and bring humanity closer together, the world's projected 3.5 billion laborers may finally realize how much more they have in common with each other than with the über-wealthy elites in their own countries.

They'll pressure governments to collaborate to ensure that their sweat and blood don't excessively enrich a tiny, global capitalist elite, but are spread more widely. They'll work to shut down tax havens where the world's plutocrats hide their earnings, and they'll advocate for treaties to prevent a "race to the bottom" in labor regulations and tax rates designed to attract companies. And they'll push to ensure it isn't just the world's richest who benefit from a global lifestyle -- by striving to open up free movement of labor for all, not just within countries but among them. Sure, it's not quite a proletarian revolution. But then again, the middle class has never been the most ardent of revolutionaries -- only the most effective. The next decade won't so much see the politics of desperate poverty taking on plutocracy, as the middle class taking back its own. But it all might put a ghostly smile on Karl's face nonetheless.

Illustration by David Plunkert

The Optimist

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The case for sending America's unemployed abroad.

Although North America and Europe have finally emerged from the darkness of the global financial crisis, and although the stratospheric growth rates of Brazil, China, and India have come down to Earth, the economies of the West still lag behind those in the rest of the world. That's particularly the case when it comes to jobs. The unemployment rate in the United States, for example, remains stubbornly around 7 percent. In Chile, Hong Kong, Indonesia, Mexico, and South Korea, however, the official unemployment rate is way lower. Faster growth is key to high employment just as recessions produce dole queues.

So here's a novel solution to America's problem: Move the people to where the jobs are.

Exporting the unemployed may sound radical, even cruel, but the quest for jobs has been a driving force behind global migration -- and population growth in the New World -- for centuries. More than 55 million Europeans, many desperate and poor, migrated to the Americas between 1846 and 1940, for example -- often with a "good riddance" from their home governments. And in the past few years, those movements have started up again. When crippling unemployment throttled Spain, some 30,000 Spaniards upped and moved to Argentina between June 2009 and November 2010. The Portuguese, meanwhile, beset by debt and slow growth at home, are heading to Brazil and oil-rich Angola. Between 2008 and 2011 alone, more than 1 percent of the Portuguese population moved to just that one African country. (In terms of relative population, that would be the same as 3 million Americans packing up and shipping off to their country's ex-colony, the Philippines, in search of a better life.)

But Americans haven't been searching for a better life somewhere else on nearly the same scale. According to the State Department, only about 6.3 million U.S. citizens live abroad, or around 2 percent of the domestic population. In relative terms, that's pathetic. About 5.5 million British people live permanently abroad, almost five times the U.S. level in per capita terms. Maybe they're trying to escape the lousy weather, but it isn't like Brits have natural advantages over Americans as travelers. British people are almost as bad at speaking other languages as Americans are, and in terms of haughty isolationism and disdain for foreigners, surely Brits are worse. (I'm allowed say this -- I'm British.)

So why shouldn't America send out some huddled masses for once? Of course Americans want a young, employed workforce to help support their aging society as it pays for rising Medicare and Social Security bills, but it would be far better for everyone if they were employed abroad rather than sitting idly at home. And many of the country's unemployed are demographically well placed for a change of scene precisely because they're disproportionately young and footloose. The Bureau of Labor Statistics reports that, as of October 2013, the unemployment rate among those ages 16 to 19 was 22 percent; among those 20 to 24, it was 12.5 percent. And the rate among men never married in all age ranges is around 12 percent. Nothing's tying them down. Go East, young men! (I'm allowed to say this -- I'm married.)

Some might wonder, though: Would other countries really want America's wastrel youth, with their lack of language skills and poor education? It is true that Gallup polls suggest only 14 percent of U.S. citizens claim they can speak Spanish well enough to hold a conversation. Look at any other language and the numbers become truly dire. Around 4 percent can parler in French, and a little less than 3 percent sprechen Deutsch. And though teaching Mandarin to toddlers is now de rigueur in suburban nursery schools from Scarsdale to Santa Monica, fewer than one in 100 Americans can converse in China's lingua franca. The good news is that English has official or special status in countries that are home to 2 billion people, and one in four of the world's people speak English to some level of competence.

And though it's true that jobs are hardest to come by for the least educated Americans, it's still not a pretty picture for recent grads. The unemployment rate for those ages 20 to 29 who had graduated from college in 2011 was 12.6 percent as of October 2011. But even young Americans who haven't made it to university have received a quality of education considerably higher than that of most people in emerging economies. The Organization for Economic Cooperation and Development runs internationally comparable tests of student achievement at the high school level. The U.S. average score on the reading tests was 500. That's behind South Korea (539), but it compares favorably with Brazil (412) and Panama (371). It's even better than Portugal (489). So buck up, C students: You might still be an attractive addition to Brazilian firms looking for some English-speaking talent. And trust me, Rio de Janeiro isn't a hardship post.

Why should we be encouraging the young and unemployed to look worldwide for better opportunities? Because the benefits of U.S. emigration extend way beyond ready jobs and a more interesting life for those in search of adventures abroad. Research by economists Gabriel Felbermayr and Benjamin Jung suggest that as little as a 1 percent increase in migration between two countries raises bilateral trade. There's also evidence from development economists Maurice Kugler and Hillel Rapoport that migrating to another country brings greater foreign investment back home. Their research suggests that if you double the number of Americans living in another country, you'll see foreign direct investment from that country to the United States increase by about a fifth. Simply put, there's a profound benefit to the economy in sending your kids overseas, not to mention the benefit of getting them out of the house for a while. (I'm allowed to say this -- I have children.)

As Congress debates immigration reform, it's worth remembering that the United States benefits from both sides of the migration equation. Immigrants coming to the United States do wonders for the local economy: They're associated with higher wages and employment for Americans, according to research by economists Gianmarco Ottaviano, Giovanni Peri, and Greg Wright. And they're responsible for a huge amount of innovation and entrepreneurship in places like Silicon Valley: Research by Duke University's Vivek Wadhwa suggests that more than half of new start-ups out there are founded by immigrants. Perhaps Washington could boost this employment exchange by offering a few more places for immigrants from countries that open the doors to U.S. emigrants.

So let's help show young Americans the door by allowing the Peace Corps to offer short-term voluntary assignments and by expanding programs like the Fulbright that support academic study overseas. And let's keep them abroad by abandoning the system that makes them pay taxes to the United States on top of the taxes they pay to their host countries. And why not encourage the portability of benefits from Medicare to Social Security? Or, thinking bigger, why not use the U.S.-EU trade talks to set up a transatlantic visa-free zone? The free movement of labor has done wonders for Europe. It's time Americans get on board. A more globalized U.S. workforce would be good for the unemployed, good for the country -- and good for the world.

Photo: Reuters/Lucas Jackson