The Inclusive Prosperity Commission, co-chaired by Lawrence H. Summers, released a new report on January 15, 2015 that offers bold new prescriptions to reinvigorate the middle class and reduce income inequality. Summer said, “No industrial democracy will succeed unless its middle class enjoys sustained growth in living standards. This depends not only on strong economic growth but also on assuring that its benefits are widely shared.”
Middle-class Americans have not seen sustained growth in living standards for a long time now. The Inclusive Prosperity Commission points to the experience of other countries to highlight that this trend can be reversed and suggests a range of policies that offer the potential for economic success to be broadly shared among all Americans.
Click here to read the full report.
History tells us that societies succeed when the fruits of growth are broadly shared. Indeed, no society has ever succeeded without a large, prospering middle class* that embraced the idea of progress. Today, the ability of free-market democracies to deliver widely shared increases in prosperity is in question as never before. The primary challenge democracies face is neither military nor philosophical. Rather, for the first time since the Great Depression, many industrial democracies are failing to raise living standards and provide opportunities for social mobility to a large share of their people. Some of those countries that have produced economic growth have done so in a manner that has left most of their citizens no better off. This is an economic problem that threatens to become a problem for the political systems of these nations—and for the idea of democracy itself.
The citizens of industrial democracies continue to value their freedom and their opportunity to participate in the task of self-government. But they also count on their political systems to create circumstances in which they can use their talents and their labor to provide a decent standard of life for themselves and their families. When democratic governments and market systems cannot deliver such prosperity to their citizens, the result is political alienation, a loss of social trust, and increasing conflict across the lines of race, class, and ethnicity. Inclusive prosperity nurtures tolerance, harmony, social generosity, optimism, and international cooperation. And these are essential for democracy itself.
The economic troubles of the democracies also erode support for the democratic idea around the globe. In our time, advocates and apologists for anti-democratic regimes argue that the democracies are no longer capable of managing their problems or creating a sense of social dynamism. Democracies are cast as sclerotic, inefficient, and ungovernable. We believe that this critique is wrong today, as it has been historically. But countering this persistent attack on democracy requires that free economic and political systems restore their vitality and reclaim their ability to deliver on the promise of prosperity for all.
It has always been the mission of progressives to ensure rising prosperity and opportunity. A strong, inclusive economy is the platform for a socially mobile, optimistic, and successful society. While the economic mission of progressives is unchanging, the means of its achievement change from generation to generation as the economy evolves. Today, we are living in the age of globalization and technological revolution. Both have delivered much benefit to society, but have reshaped the political economy of western industrialized countries in ways that challenge the middle class and those striving to get into it.
Our report is about embracing the new economic opportunities of the 21st century by finding ways to ensure they serve the vast majority of society. In previous eras, political institutions have responded to economic transformations to ensure prosperity is shared: the New Deal in the United States and the European social welfare state; the “third-way” politics of putting people first of Clinton and Blair by investing in people and reforming institutions. Just as it took the New Deal and the European social welfare state to make the Industrial Revolution work for the many and not the few during the 20th century, we need new social and political institutions to make 21st century capitalism work for the many and not the few.
We offer this report on the urgency of achieving inclusive prosperity because we believe democracy must serve this common good, the cause of social justice and the aspirations of parents for their children. For democracies to thrive, rising prosperity must be within reach of all of our citizens.
Lawrence H. Summers is the President Emeritus of Harvard University. Ed Balls is the Labour and Co-operative Member of Parliament, or MP, for Morley and Outwood and Shadow Chancellor of the Exchequer in the British Parliament. They are the co-chairs of the Inclusive Prosperity Commission.
* The term “middle class” is used interchangeably throughout this report with “low and middle income,” which is more commonly used in some other countries.