Globalization and the Middle Class

Abstract

The most important question for social policy today is: can the United States participate in global trade while maintaining a robust middle class? Ordoes expanded global trade necessarily mean doom for the U.S. middle class and others in advanced industrial nations? This question might have sounded provocative, incendiary, or just plain silly a decade ago, but it can no longer be ignored. Several different approaches have been advocated to preserve the living standards of the middle class in advanced countries in the face of expanded global trade. This essay examines three clusters of policies that are the most promising, policies to (1) encourage a race to the top that cancounterbalance a race to the bottom; (2) promote the creation of local and regional agglomeration economies that will act as counterweights to a race tothe bottom, and (3) foster firm-level innovation and develop the skills andhuman capital of the local population. It concludes that we adopt policies thatbraid these three together in order to preserve the U.S. middle class.