Joseph Stiglitz is a Nobel laureate in economics, a professor at Columbia University and chief economist at the Roosevelt Institute.
Donald Trump's astonishing victory in the U.S. presidential election has made one thing abundantly clear: Too many Americans feel left behind. It is not just a feeling; many Americans really have been left behind. It can be seen in the data. And an economic system that doesn't "deliver" for large parts of the population is a failed system. So what should Mr. Trump do about it?
Over the past third of a century, the rules of America's economic system have been rewritten in ways that serve a few at the top, while harming the economy as a whole, especially the bottom 80 per cent. The irony of Mr. Trump's victory is that it was the Republican Party he now leads that pushed for extreme globalization and against the policy frameworks that would have mitigated the associated trauma. But history matters: China and India are now integrated into the global economy. Besides, technology has been advancing so fast that the number of jobs globally in manufacturing is declining.
The implication is that there is no way Mr. Trump can bring a significant number of well-paying manufacturing jobs back to the United States. He can bring back advanced manufacturing, but this will bring few jobs. And he can bring back low-wage jobs, but not the high-paying jobs of the 1950s.
If he is serious about tackling inequality, he must rewrite the rules yet again, in a way that serves all of society.
The first order of business is to boost investment and restore robust long-term growth. Specifically, he should emphasize spending on infrastructure and research.
Improved infrastructure would enhance the returns from private investment, which has been lagging. Ensuring greater financial access for small and medium-sized enterprises, including those headed by women, would also stimulate private investment. A carbon tax would provide a welfare trifecta: higher growth as firms retrofit to minimize emissions; a cleaner environment; and revenue that could be used to finance infrastructure and efforts to narrow the economic divide. But, given Mr. Trump's position as a climate-change denier, he is unlikely to take advantage.
A comprehensive approach is also needed to improve U.S. income distribution, which is among the worst in advanced economies. While Mr. Trump has promised to raise the minimum wage, he is unlikely to undertake other critical changes, such as strengthening collective bargaining rights and negotiating power, and restraining compensation to chief executive officers.
Regulatory reform must move beyond limiting the damage the financial sector can do and ensure that the sector genuinely serves society.
In April, President Barack Obama's Council of Economic Advisers released a brief showing increasing market concentration in many sectors. That means less competition and higher prices. The United States needs to tackle these concentrations of market power, including the newest manifestations in the so-called sharing economy.
America's regressive tax system – which fuels inequality by helping only the rich get richer – must also be reformed. An obvious target should be to eliminate the special treatment of capital gains and dividends. Another is to ensure that companies pay taxes, perhaps by lowering the corporate rate for companies that invest and create jobs in America and raising it for those that do not. As a major beneficiary of this system, however, Mr. Trump's pledges to pursue reforms that benefit ordinary Americans are not credible.
Mr. Trump will probably also fall short on equality of opportunity. Ensuring preschool education for all and investing more in public schools is essential, but he has been virtually silent on this topic.
Restoring shared prosperity would require policies that expand access to affordable housing and medical care, secure retirement with a modicum of dignity, and allow all Americans to afford a postsecondary education commensurate with their abilities and interests. But while I could see Mr. Trump supporting a massive housing program (with most benefits going to real estate developers like himself), his promised repeal of the Affordable Care Act would leave millions of Americans without health insurance.
The problems posed by the disaffected Americans – resulting from decades of neglect – will not be solved quickly or by conventional tools. An effective strategy will need to consider more unconventional solutions, which Republican corporate interests are unlikely to favour.
Much has changed since president Ronald Reagan began hollowing out the U.S. middle class and skewing the benefits of growth to those at the top, and policies and institutions have not kept pace. From the role of women in the work force to the rise of the Internet to increasing cultural diversity, 21st-century America is fundamentally different from the America of the 1980s.
If Mr. Trump actually wants to help those left behind, he must go beyond past ideological battles. The agenda I have sketched is not only about the economy: It is about nurturing a dynamic, open, just society that fulfills the promise of Americans' most cherished values. But while it is, in some ways, somewhat consistent with Mr. Trump's campaign promises, it is the antithesis in many others.
My very cloudy crystal ball shows a rewriting of the rules, but not to correct the grave mistakes of the Reagan revolution. Rather, the new rules will make the situation worse, excluding even more people from the American dream.