The Dow Jones Industrial Average is hitting record highs. Gas/oil prices have retreated somewhat. Unemployment is at a historically low 4.6%. Inflation remains under 3%. Interest rates have receded.

By these and other measures such as GDP, the economy is doing well. Why, then, are voters angry about the economy, with a majority saying they disapprove of Bush’s/Republicans’ handling of the economy?

Alan Murray hits the nail on the head with his commentary in today’s Wall Street Journal:

Large numbers of Americans seem to have lost their belief in John F. Kennedy’s famous aphorism that a rising tide lifts all boats. “They know the economy is white hot,” says political analyst Charlie Cook, “but they also know they aren’t in it….There’s a feeling that some people are getting theirs, but we aren’t getting ours.”

There’s a well-known litany of reasons for that. Median earnings have been growing at a disturbingly slow pace, even as profits and high-end pay have soared. Health-care costs are not only increasing, they increasingly are being paid by consumers, not by employers or the government. Pensions are disappearing, as is job security — and any sense of long-term loyalty from employers. As pollster Peter Hart puts it, “there’s no gold watch” waiting at the end of a career these days. He cites a cartoon in which the boss says: “Mr. Jones, the reason we are letting you go is because you’ve given us the best years of your life.”

Meanwhile, a thin slice of America is enjoying unprecedented prosperity. CEO pay is one of the most visible manifestations, rising in the past decade at triple the rate of the median worker’s pay. In…Greenwich, Conn., skilled financiers bring home eight- and nine-digit paychecks, unimaginable in the not-so-distant past. Americans have never been big on the politics of envy, in part because they hoped someday they would join those at the top. But increasingly, they wonder whether the economic game is rigged, and whether all these riches are the result of backdated options or insider trading or some other trickery that doesn’t benefit them.

He goes on to note that the disconnect occurring between the upper class and everyone else may result in the demise of the pro-business, free-market platform popular in Washington for the last quarter century. Increasingly, Democratic challengers like Senatorial contender Sharrod Brown of Ohio are adopting a populist, anti-trade, anti-globalization, anti-immigration, anti-big big business message that is bound to appeal to the struggling and rapidly disappearing American middle class.

I have mixed feelings about this. Obviously the sources of increasing inequality are glaringly obvious and real as described in the article…but I’m concerned about tossing the baby out with the bathwater. America is really feeling the negative effects of globalization (which powers a lot of the deleterious changes being seen in American industry), because our standard of living has been so much higher compared to the rest of the world. Globalization evens the scales, and while that means an improvement to everyone else it means pain for us. Can we really avoid this, though..or should we?

The rest of the world has the same right to a higher standard of living as Americans do. But even if we disagree on this point, it’s hard to see how we could get America to “opt out” of the globalization taking place everywhere else without being left woefully behind. For all its drawbacks, globalization does increase trade, wealth, and access to technology..to the ultimate betterment of all. Can we really afford to build a virtual wall around us, and would such a wall succeed? It never has before.

There’s a lot wrong with globalization that is hurting Americans, and these things must be fixed. A glaringly obvious example is other countries’ disregard for health, labor, and environmental standards for their workers–which allows them to milk their workers for pennies on the dollar while American industry is “saddled” with these obligations. We have to exert strong pressure on our trading partners to adopt similar standards so that all wealth is created fairly without placing unjustifiable burdens on workers or the environment. Another example of globalization gone wrong is countries like China manipulating their currencies to maximize their exports, keeping them cheap regardless of true fundamental supply and demand. This too must stop.

There are also problems with American business itself. Why do CEO’s make ridiculous salaries (more than 42 times that of the average worker) without such pay being tied to solid performance? Why is there so much crookedness surrounding stock option grants? Why are prescription drug prices so out of control when compared to the rest of the world? Why are companies allowed to fund worker retirement plans with risky company stock instead of cash to be invested as the worker wishes? Why are we failing to address the looming crises of social security and medicare, those safety nets for Americans most in need? Why do we keep cutting taxes on those who need it the least instead of those who need it the most? Government has a duty to answer these questions for the sake of the middle class, and my personal belief is that these questions of fair trade and fair business are where Democrats should focus their attention instead of appealing to people’s xenophobia.

Fixing problems like this won’t cure all the pain, but will minimize it while allowing America to reap the longer-term benefits of globalization–improved living standards elsewhere create larger markets for our products. Americans have a long history of believing they live in a meritocracy–a society where anyone who works hard enough can climb the upper rungs of the ladder of success. Globalization and a broken American system of business are increasingly rigging the game against most Americans while letting the upper class elite reap wealth beyond the imagination of most people.

This disparity has to end, and Democrats would do well to address it without digging their heads in the sand against the rest of the world. God knows we’ve done enough of that under the Republicans.

Tags: business, democrats, economy, environment, fair-trade, globalization, labor-standards, medicare, middle-class, prescription-drugs, social-security, stock-options, trade, upper-class