Eric Beinhocker is a complexity economist. He thinks about the economy as an ecosystem and the middle class as the "mass" at the center of its food web; middle-class families, he says, are the tall grasses of our economic savannah, providing the labor for production, the consumption for goods, and the savings that turn into investment. "If the middle class is doing well it creates a virtuous cycle of consumption, investment, and job growth rippling across the economic web," Beinhocker says. "If the middle class is not doing well, that cycle can go into reverse."
America's middle class is not doing well. That's putting it mildly. As NJ documented
in its cover story last week, its decline - worsening over decades but punctuated during the Great Recession and its aftermath - poses a serious threat to America's economic future. But what can we do about that?
Beinhocker's solutions start with changing how Americans think about the economy and how it works. He is a former McKinsey researcher, the executive director of the Institute for New Economic Thinking at the Oxford Martin School, and the author of The Origin of Wealth, a bible of sorts for the emerging field of complexity economics. In a series of emails this week with National Journal, Beinhocker laid out a straightforward plan for launching a middle-class turnaround in America, starting with changing our economic thinking.
NJ: If we start to think about the economy that way - with the middle class as the tall grass in the center of our food web - how should we then change our thinking about economic policy?
EB: Thinking of middle class as at the centre of a larger economic web creates a shift in perspective and raises some pretty challenging questions about the role of government.
Governments can't completely shelter or protect their middle classes from the changes being wrought by globalization and technology. But they can do more to help them navigate those changes and moderate the pace of change.