Magazine March 9, 2020, Issue

The New Forgotten Man

(Steve Marcus/Las Vegas Sun via Reuters)
Neither elite manager nor wage-earner

During this season of populist fervor and resurgent nationalism, center-right policymakers and pundits have joined progressives in dividing America into two classes, workers and the managerial elite. Like those on the left, they regard the social and economic gulf between corporate owners and managers and the people they employ as one of the foremost policy problems of our time. They have fallen silent about the millions of Americans who are neither managerial elites nor stereotypical wage-earners. These are the shop owners, self-employed workers, small-scale entrepreneurs, and salaried employees who save their money and improve their credentials hoping to branch out and move up. They have long been at the heart of American economic growth, collectively creating massive numbers of jobs every year and keeping the American dream alive for themselves and others.

In conservative circles today, this sort of worker has become the new “forgotten man” (or woman). The aftermath of the Great Recession, followed by Trump’s 2016 election, produced a new group of pro-worker conservatives who advocate a combination of protectionism and industrial policy, expanded wage subsidies, new forms of unionizing, and new family benefits such as paid parental leave and more generous child tax credits and cash allowances. They have arisen in opposition to those—let’s call them the “traditional Reaganite conservatives”—who endorse low taxes, limited government, and other policies that favor CEOs and managerial elites ostensibly in the name of economic growth.

Pro-worker conservatives are right to criticize pro-business conservatives for having neglected the needs of workers over the years. Trump’s appeal in 2016 was authentic and based on important, deeply held sentiments shared by millions of Americans. But the agenda advocated by pro-worker conservatives is much less aspirational than they make it out to be. Providing $9-an-hour workers with a wage subsidy to lift their pay to $12 an hour, offering them membership in a “works council” that (supposedly) provides solidarity and some limited power to negotiate interests with employers, and offering tax and paid-leave benefits to make it marginally easier for them to raise a child—all of these reduce the pain of low-wage employment but do little to help people take advantage of opportunities and achieve the kind of upward mobility we typically associate with the American dream.

But when pro-worker conservatives talk of entrepreneurs, they fasten on the untrustworthy titans of Silicon Valley as their only reference point. All other types have vanished from their landscape. Hourly workers have become their image of “real America” today and the focus of their policy ideas.

The result has been an odd kind of grievance populism, disconnected from the populist tradition that historian Christopher Lasch brilliantly analyzed in his classic The Revolt of the Elites. Lasch claimed that, properly understood, American populism is rooted in a rich understanding of self-reliance and independence. “Populists regarded self-reliance (which, of course, does not preclude cooperation in civic and economic life) as the essence of democracy, a virtue that never went out of demand,” he wrote. As, in fact, “the authentic voice of democracy,” populism “assumes that individuals are entitled to respect until they prove themselves unworthy of it, but it insists that they take responsibility for themselves.”

This was the populism of Ronald Reagan, however much he is remembered today as a tax-cutting friend of big business. “Without self-reliant, creative citizens,” he said, “no nation can be self-sufficient politically or economically.” Self-reliance and “the skills of the people” were critical to the success of free-market policies in promoting economic growth. While addressing the board of governors of the World Bank and International Monetary Fund in 1981, Reagan said, “Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success—only then can societies remain alive, dynamic, prosperous, progressive, and free.”

This understanding of the American worker is at the heart of the grassroots dynamism that Edmund Phelps, Nobel laureate in economics, has described as a “vast imaginarium” in which workers throughout the economic landscape—hourly wage-earners, salaried employees, small-scale business owners—have incentives to create, build, and make new things and new ways of doing things. Such an economic culture always leaves open the possibility of ownership and self-direction, even for someone who has spent 20 years as a salaried employee at a big company. Innovators and owners may be a minority of the workforce, but their flourishing benefits the rest of us in the form of the jobs they create, the wages those jobs offer, and the unforeseen opportunities that their new ideas and products give rise to—which is why policy should be designed to serve them.

Today’s pro-worker conservatives sing a different song. They have gone much farther than their decaffeinated progenitors, the reform conservatives, who also tried to focus the conservative intellectual project on the needs of everyday workers, in that they have made redistribution and protectionism central tenets of their cause. They have concluded that a strong federal government is required to unrig the game that the managerial elite has designed to enrich itself. Rather than seeking to bolster the independence and self-reliance of people living in flyover country, they call for wage subsidies. If you believe Phelps, this is a recipe for European-style stagnation, but that caveat does not dissuade pro-worker conservatives.

Oren Cass, a conservative proponent of industrial policy, wage subsidies, and trade restrictions, has thoughtfully argued that public policy should aim to help workers support “strong families and communities.” But in his telling, dynamism comes almost entirely in the form of disruption, which needs to be balanced with redistributive supports for displaced workers, rather than being an economic force that benefits people up and down the income spectrum. Senator Marco Rubio, who has spoken and written thoughtfully on the dignity of work, largely stays within the “corporations vs. workers” framework in his rhetoric and proposed solutions. Senator Josh Hawley supports wage subsidies because, he says, for too long our economy “hasn’t rewarded workers.” In one of the earliest essays of the Trump era aimed at diagnosing the elite–worker divide, Michael Lind wrote of the emergence in the 20th century of “managerial capitalism,” which has in turn given way to new forms of “global oligopolies” in which the managerial elites have rigged the game for themselves, making entrepreneurial capitalism a thing of the distant past.

Variations on these themes have now become standard fare on conservative talk radio, cable TV, and the pages of conservative publications. They are part of a new ideological milieu in which Fox’s Tucker Carlson has catapulted to the top of prime-time cable ratings by ginning up resentment against big companies and elite institutions, even remarking that Democratic senator and presidential hopeful Elizabeth Warren “sounds like Donald Trump at his best” when she is talking about trade and American manufacturing.

Pro-worker conservatives are mathematically correct that employees outnumber entrepreneurs and business owners, but a policy agenda focused solely on improving the conditions of workers and restraining globalist executives is short-sighted. Reagan’s reasons for promoting small-scale business owners and scrappy entrepreneurs in his day are just as valid in ours. New businesses create a disproportionate number of all new jobs created every year. The pay those jobs offer is competitive and rises more swiftly amid greater dynamism. And the nature of dynamism is such that, the more people hear about someone who started and runs a successful business, the more they will gain the motivation and know-how to do the same.

Pro-worker conservatives also misread the mood of working-class Americans, whose populist anti-elitism is more cultural than economic. In fact, an American Enterprise Institute survey found that working-class Americans, defined as those with a high-school degree but less than a college degree and earning between the 20th and 50th income percentiles, are bullish about their personal financial situation and the economy. Asked whether they are living the American dream, the vast majority say they are on a path to it or already living it.

A policy agenda focused on aspirations—on the Main Street flower-shop owner, the jewelry-maker selling earrings on Etsy, the former delivery-service driver who borrowed enough to lease two trucks and hire six people to start a local moving company—would likely have as much appeal to American workers as one focused on wage subsidies, industrial policy, and tax credits. And, given the salutary effects that increasing small-business formation would have on earnings, such an agenda would have at least as good a chance of raising wages as would the policies of the pro-worker camp.

Some may believe that technology and globalization have changed the economy so much that small-scale entrepreneurs are a thing of the past. I think such a conclusion is premature. We have not even begun to remove the barriers to grassroots dynamism that have been in place for more than a generation, such as land-use policies that prevent lower-income people from living in prospering areas, or licensing laws that discriminate against small-scale entrepreneurs, or non-compete agreements that keep young workers from job-hopping up the income ladder, or the depletion of local sources of capital for smaller enterprises. Additionally, policy entrepreneurs should develop proposals for tax relief, portable health benefits, and income insurance for certain classes of the self-employed.

But before such an agenda can be worked out, conservative policymakers need to rediscover that there is much more to the American economy than managers and workers. Dynamism is not a given, and if we do not intentionally cultivate it at the community level all across the country, the future will be bleaker for managers and workers alike. 

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Ryan StreeterMr. Streeter is the director of domestic-policy studies at the American Enterprise Institute.

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