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Hollowed Out

Hollowed Out: Why the Economy Doesn't Work without a Strong Middle Class

David Madland
Copyright Date: 2015
Edition: 1
Pages: 272
https://www.jstor.org/stable/10.1525/j.ctt14qrz80
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  • Book Info
    Hollowed Out
    Book Description:

    For the past several decades, politicians and economists thought that high levels of inequality were good for the economy. But because America's middle class is now so weak, the US economy suffers from the kinds of problems that plague less-developed countries. AsHollowed Outexplains, to have strong, sustainable growth, the economy needs to work for everyone and expand from the middle out. This new thinking has the potential to supplant trickle-down economics-the theory that was so wrong about inequality and our economy-and shape economic policymaking for generations.

    eISBN: 978-0-520-96170-8
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Illustrations
    (pp. ix-x)
  4. CHAPTER ONE Middle Out vs. Trickle Down
    (pp. 1-27)

    On April 30, 2012, Edward Conard, a former partner for the financial management company Bain Capital and multimillionaire who retired at age fifty-one, sat across from Jon Stewart, host ofThe Daily Show, to promote his new book. Conard smiled and stared intently through his black-rimmed glasses as Jon Stewart, the liberal host of the comedy show, held up his book and described its contents. Conard’s book argued that America’s economy would be stronger if people like Conard were even richer and the country had even higher levels of economic inequality.

    Stewart was puzzled by Conard’s argument and joked that...

  5. CHAPTER TWO Trust
    (pp. 28-55)

    The small town of Chiaromonte in southern Italy is nestled into the mountains, surrounded by fields, olive trees, small vineyards, and oak forests. The climate is quite mild, usually in the mid-80s in the summer and above freezing during the winter. Despite this postcard-perfect setting, life is bleak, as Harvard political scientist Edward Banfield explained in his classic bookThe Moral Basis of a Backward Society. Most residents are quite poor and have little chance to get ahead. Employees live in fear of being cheated by their employers. There are no banks in town or other sources of credit to...

  6. CHAPTER THREE Good Governance
    (pp. 56-109)

    The United States was founded as a reaction against English elites making rules that harmed the interests of ordinary Americans. Not surprisingly, our country’s founders recognized that the new, democratic government they were creating would not work properly if society was polarized into extremes of wealth and poverty. A well-functioning democracy, Thomas Jefferson believed, depended on a base of self-sufficient small landholders—middle-class, yeoman farmers—with enough economic freedom and independence to be good citizens.¹ Similarly, James Madison thought that a large gulf between the rich and the poor would cause political conflict that would harm the quality of America’s...

  7. CHAPTER FOUR Stable Consumer Demand
    (pp. 110-126)

    In 1914, Henry Ford took a bold action that changed the automobile industry and helped shape the American economy for decades to come. In that year, he more than doubled his workers’ wages, paying them $5 per day—a big jump from the $2.34 he previously paid—and far above what the market required.¹ Newspapers ran headlines trumpeting the decision. As workers from around the country flocked to Detroit, eager to earn such a high wage, most took it for granted that Ford was acting based on some high ideal. Many supported Ford for what they presumed was an amazing...

  8. CHAPTER FIVE Human Capital
    (pp. 127-154)

    When Steve Jobs—the founder of several of the most important companies in the world including Apple and Pixar Animation Studios—was six years old, his father gave him some small tools and set aside a corner of his workbench. “Steve, this is your workbench now,” his father said, and he began showing his son how to take things apart and put them back together.¹ Jobs’s father was not highly educated—he never graduated from high school—but he was able to share his mechanical skills as well as his rudimentary knowledge of electronics with his son.

    Over the years,...

  9. CHAPTER SIX Creating a Middle-Class Society
    (pp. 155-168)

    The goal of this book has been to explain how the hollowing out of the middle class and extreme levels of inequality have harmed America’s economy by undermining trust, causing poor governmental performance, weakening and destabilizing demand, and blocking human capital development. In advancing this argument, the book aims to encourage economists to study inequality through a much broader lens than they have in recent decades and provide additional fuel for the ongoing introspection forced upon the discipline by its obvious failings in the lead-up to the Great Recession. Most importantly, the book aspires to help change how politicians think...

  10. ACKNOWLEDGMENTS
    (pp. 169-170)
  11. NOTES
    (pp. 171-250)
  12. INDEX
    (pp. 251-257)