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June 10, 2015

Interviews: A Q&A with Peter D. Kiernan

By: Dylan Schleicher @ 10:30 AM – Filed under: Current Events & Public Affairs, Innovation & Creativity, Leadership & Strategy


"We need a more flexible and nimble way of thinking about the middle class or else our nostalgic recollections will lead us in the wrong direction … People’s aspirations have always been a truer indicator of middle class well-being than a purchasing index or a wooden measure like availability of credit.

The middle class is like our central nervous system and the waxing and waning of debt availability or the erosion of real wages, while vital ingredients, are less indicative than by asking how people feel about their hopes for a middle class life."

—Peter D. Kiernan


We continue our Thinker in Residence with Peter D. Kiernan with some questions about the his new book, American Mojo, the nature of the middle class, and the American psyche.

Q: Let’s begin with what seems like a simple starting point of the conversation, but that quickly turns both statistically and psychologically very tricky: What or who is the middle class, and what is the best way to define it?

PDK: It took me years to figure out a workable answer to this question.

The middle class has become a mapmaker’s nightmare because American society has become so dynamic. Definitions fail almost as soon as the snapshot is taken.

The middle class is like an atom—with a core group and swirling electrons constantly orbiting marking the entering and leaving of it.

Imagine, women contributed 2 to 6 percent of household income in the 70s and today their contribution exceeds 42%. In fact, women often are the key determinant of a family’s ability to stay in the middle class.

Another example is that there are 45 million poor in this country—a stupendously high number. But more troubling still is that above them is another 40 million Americans hovering just a lost paycheck or a twist of fate from a stint below the poverty line. Many hovering poor make that trek and claw their way back out. Some 40% of American children will depend on food stamps for some period of their childhood.

And, for all of the evidence of a powerful 1 percent, things are just as volatile on the upper end. The average millionaire in America now goes bankrupt at least three times. And fully 20% of Americans will spend some time above the IRS and others’ definitions of the wealth mark… even if only for a year or two.

Most Americans label themselves as middle class—they are the majority. But so many middle class aspirations have gotten beyond the grasp of that majority. That’s because while overall inflation has been moderate, relevant inflation—i.e. the costs of typical middle class life: education, housing, energy, food, health care, automotive, and retirement—have been spiking higher at way beyond cost of living increases.

Marry relevant inflation to flat real wage growth for decades and job insecurity and you find many families that consider themselves middle class are unable to afford the elements of a middle class lifestyle. Yet the concept of belonging to the middle class is still a major tonic for all Americans.

We need a more flexible and nimble way of thinking about the middle class or else our nostalgic recollections will lead us in the wrong direction when boosting the middle.

People’s aspirations have always been a truer indicator of middle class well-being than a purchasing index or a wooden measure like availability of credit.

The middle class is like our central nervous system and the waxing and waning of debt availability or the erosion of real wages, while vital ingredients, are less indicative than by asking how people feel about their hopes for a middle class life.

Q: You make a great point early in the book, that the middle class that we nostalgize, the one largely built following WWII, was built very deliberately with a combination of government policy—namely the GI bill that extended affordable housing and education to returning service members—and individual initiative, but that the driving force was individual ambition and aspiration. Assuming we still have that individual ambition, what can we as a nation (or what can the government) do to rebuild the middle?

PDK: Anything great invariably involves pulling everyone together. Civil rights, women’s rights, and lifestyle rights are just one set of examples where we moved as a nation towards broader acceptance. But there is always friction and unrest before we settle on the right course.

Our national response as 16 million men and women returned victorious from the battlefields and outposts across the country and the theaters of World War II was a hallmark of what is great about America. The outpouring for these men and women was genuine—lending everyone a hand as they re-entered postwar society. Education and housing benefits, job training and the general mood was symbolized by a collective “Welcome home.”

Today, we have lost our collective will to rebuild national momentum—even around items where there is no argument.

Where is today’s parallel vision for the Highway Trust Fund that helped create a 40,000 plus mile national highway colossus?

None of our infrastructure needs are in dispute. Of our over 70,000 bridges, 1 out of 9 is structurally deficient. We lack the will to fix problems on which we all agree—oh yes, and the money too.

The middle class was created during a time when we collectively made difficult choices. Our reverence and respect for those who had sacrificed so much trumped expensive and terrifying financial obligations. Veterans came home… and we built it.

Today we wait for an intervention, and won’t make tough choices. Despite dire warnings about crumbling infrastructure, the Gas Tax which funded many highway and other improvements has not been raised since 1993.

We are timid in the face of immediate demands. How else will we fund the tens of billions necessary to reboot our infrastructure?

Here’s another example: 102 nuclear power plants are still running in our country—no nation on the planet generates more nuclear power. Yet we are in denial. We have not built a new plant since 1979’s Three Mile Island incident. Fair enough—nuclear power makes many uneasy.

But our average plant is over 40 years old, and we run these aging plants at full capacity. Some states derive most of their power from nucs. The risk is undeniable, but we look the other way.

Many hope for alternative energy solutions. But we have a basic problem: most of our electric transmission infrastructure was built before the 1980s and is woefully out of step with the advance of alternative power generation. Throughout the country the grid is plagued by congestion and reliability issues.

Renewable energy has been a recent national priority and a collision is coming. We will ultimately be generating more clean power than can be transmitted down the lines. Again we ignore what must be faced.

We malign China for overspending on their infrastructure with some justification. But we have signally failed to see how a weak infrastructure sets our middle class behind.

These are investments that must be made. Doing so will boost the middle class.

Too often we lose our train of thought in debates about raising taxes. How about focusing on the more important point—what will we do with the money? How can we rebuild the middle class?

Funding infrastructure is one way. Feeding the national growth requirements of emerging nations is another. That is an irony that will require tapping the intelligence of the American people. They have the brains for it, but politicians are timid.

Education is a longer term solution, but we over rely on it as a catch-all… and it won’t be one. Too often education is used as a broad brush bromide that will not address major problems for our middle class.

If an automobile or chemical company abandons a plant leaving a tepid pool of toxins, we demand environmental clean-up. Where is that same resolve to help the men and women left behind? Their jobs will never return, the community may be facing its own demise and housing, schools and town services are destined for diminishing returns.

Pick what’s more toxic—a pool of poisons or the lost hope of middle class citizens?

We watch disinvestment by states in their public university students. We tolerate cuts in NIH and health care exploration funding at the national level. We stand by as productivity enhancements drive robotics and other job eliminating advances in business and operations technology and what do we do?

After World War II everybody made a vast collective sacrifice for the common good. That spirit needs to be visited upon all of us—certainly the 1 percent, but also our corporations, regulators, educators, and those in position to hire and train employees, including labor and union leadership.

Only with a core belief in rebuilding and shared sacrifice can we capture the opportunities the world is laying at our feet. And they are limitless.

Take the emerging world health opportunity—by 2030 as many as 100 million Indian nationals are projected to have diabetes. The market value for health care companies in all Asian countries (other than Japan) is under 2 percent. As a percent of Asian GDP it is miniscule. Africa is even lower. In America it is 17%, heading to 20.

In the next five most populous countries after America, health care averages under 4% of GDP. Won’t these emerging nations demand better health care as their fortunes improve?

Opportunities abound in the developing world as new middle class members look to improve the quality of their lives. We need to lead this march, because outside our borders is 80 percent of the world’s purchasing power, 92 percent of the world’s economic growth, and 95 percent of the world’s consumers.

Don’t look for the government to build a middle class. We have to build it ourselves as we always have—together.

Q: So many talking heads and pundits frame globalization as a zero-sum game—that the rise of an Indian, Chinese, or Brazilian middle classes somehow diminishes the American middle. You see things differently. How can the rise of the global middle class actually contribute to the rebuilding American middle class?

PDK: The key question is whether the global middle class is an endless shining sea of opportunity or an infinity pool where water spills over the edge to be distributed to other parts of the pool.

In places as unlikely as Ethiopia, Myanmar, and Vietnam, we are witnessing the flourishing of a genuine middle class. The continent of Africa boasts tens of millions of middle class workers, and nations like Nigeria are sitting on oceans of oil to help fuel that growth.

Just recently, Brazil surged past Britain to be the number seven economy in the world. Increasingly these emerging nations are creating their own version of the middle class miracle. And if we let them do so in isolation we will miss one of the great opportunities in history to fortify our own middle class.

I do not believe in the limitless ability of the world to continue creating middle class jobs. But there is still so much runway before we reach global limits on middle class prosperity.

No other nation has more skills and capabilities than the United States. Dithering will get us nowhere because these nations are impatient to create their own modernity.

And for those emerging nations with the most humble backgrounds, minor adjustments in the well-being of their people translate to huge improvements in their society. Remember that China is gaining and will likely attain the status of G1 economy. And when they do, it will be with the most poor, the most elderly, and the most sick. They will represent a different kind of leading economy—a poor little rich nation.

Others are following China and India’s lead.

China, India, and the USA are the top three nations in population. Everyone knows that. But for “the next five,” change on the leaderboard has been dramatic.

The next five most populous are Indonesia, Brazil, Pakistan, Nigeria, and Bangladesh. Building our middle class will mean providing goods and services on their inexorable march to create their middle class.

Every one of their economies is growing faster than ours. They will grow in well-being whether America trades with them or not. If we dither, other nations will quickly leap into the breach. Just as America demurred when asked to join the Asian International Investment Bank led by China, our allies in Britain and Europe will waste little time in leaping over us to get in line.

There are limits to growth, but the next decade or so should bring a billion more people into the global middle class. The OECD (The Organisation for Economic Co-operation and Development) projects another billion on top of that in the next decade.

The OECD forecast of another 2 billion middle class souls among the projected 9 billion on earth in another 20 years certainly sounds optimistic. But national psychology is a vital ingredient here. If these nations are looking for a way to bring modernity and middle class lifestyles to their country, who is better than the United States in helping them achieve that elusive target?

Any nation that engages these emerging tigers will find that their own well-being and their own middle class advances. It’s a ride American enterprise cannot afford to miss.

And, anyone who feels that gains outside our borders somehow come as a loss inside America is placing zero sum game theory in the way of a runaway freight train—and runaway trains don’t evade obstacles.

Q: In the book, you suggest an affirmative action for the poor. I think that our friend John Hope Bryant, author of How the Poor Can Save Capitalism, might agree with this (as he would with your section on MLK’s role in issues of economic justice and helping build the middle class). So, I’ll ask you a question I asked him when his book came out: Seeing as how American capitalism is constantly looking for new markets to expand into, and will go (and has gone) to the ends of the Earth to pursue economic growth, and helped build middle classes there... Why is there such a blind spot with regards to growing the economies of poor communities here in America? Why do they not see opportunity for growth there? And what does “affirmative action for the poor” look like?

PDK: One of the great truths of our society is that capitalism, left unchecked, is the greatest peacetime concentrator of wealth ever devised. Once wages and productivity were severed, the greatest return came to those who held the underlying capital in the business.

We have had poverty fighting organizations by the thousands, many of which I have visited and investigated in due diligence, point to that poverty line and say their goal was to get people above it. For generations that may well have been enough.

But that line serves a different purpose now—because our definition of poverty has not aged well.

Today there is a vast number of Americans hovering just a car wreck or a cancer diagnosis away from slipping below that line. Along that seam is where all the action is.

Now we must make the swirling in and the climbing out of poverty less arduous. One way to do so are to extend programs like Earned Income Tax Credit (EITC) into higher reaches of the lower middle class, and beyond just families.

We also need to help working mothers who represent a majority of poor households have easier and tax deductible child care available to them.

Many business and political leaders use the bromide of education as their solution to the problems of poverty and to building economic empowerment in poor communities. It’s hard to argue with the broad brush of education—but their solutions are so vague against the problem. On its own education won’t work.

Two examples: NEETs and Homeless Students. Imagine every living soul in Los Angeles and Philadelphia—every person. That’s how many American young people between the ages of 16 and 25 are NEETs: Not in Employment, Education, or Training.

NEETs are a worldwide phenomenon. But, in America, many of those 6.2 million young people are without hope or prospects. Many have been incarcerated, are gang members, and involved with drugs.

But look deeper. The majority are among the 7000-a-day who drop out of school.

Let’s get practical for a moment. If you are 22 years old with modest reading and math skills, with at least 3 or 4 years since you were last in a classroom, how likely are you to sit with teenagers to learn what you need to get ahead?

What could be a sadder and more long-lasting issue that a 22 year old without hope?

How about the kids still in school? Isn’t education the answer for them?

Imagine every person in Dallas. That’s how many public school kids will walk out of school when the last bell rings with no home to go to. So the car, or the shelter, or the streets, or the tent is where they will spend the next 16 hours. They will be hungry, or food insecure, never knowing for sure when to expect their next meal. Their health care will be substandard. They are twice as likely as their classmates to be abused, incarcerated, or do drugs.

Which leads to a seminal question: Just how good must that teacher be during the eight hour school day to counteract all those societal anchors? Our 4 million strong army of public school teachers is without peer in the world for talent and dedication. But they are no match for the dragons of hunger and homelessness that face 1.2 million of their students every day when the school bell rings.

Q: You very clearly and demonstrably state that we should “make jobs a true national priority.” What are some ways we can do that—both short term, quick-fixes to get the ball rolling, and long-term with regards to education?

PDK: We need a national program to help our NEETs with remedial education, job preparation and real jobs. It will have to be a public/private partnership.

How will we pay for yet another bureaucracy? Business will happily fund it—and here’s how:

Some quick things: Grant visas to all-star foreign computer, science, and engineering students who can fill jobs that are unfilled now because people lack training. These jobs are multipliers; 4 people get hired when one of these positions is filled. This is a twofer. We get a job filled that multiples, and we prevent that job and its multiplier effect from migrating overseas.

And, we should charge high tech companies $10 to 20 thousand a year for this privilege. If we did so for 50,000 visas we would create 200,000 jobs and generate between $500 million and a billion. If we ran this program for 5 years it would dwarf the Race To The Top spending.

We can tie these jobs into NEET programs. But there are more things we can do.

We could grant special incentives to STEM (Science Technology Engineering and Math) teachers and students. In the decade ending 2020, America’s tech economy should create 1.2 million software and computer jobs—yet we graduate just 40,000 such majors a year. Same sort of openings are there in biotech, pharma, and other surging technology businesses.

We can also build better bridges between young people and jobs.

Let’s examine the disconnect between two mistrusting sides of an imperfect bridge: education and business. A McKinsey study called “Education to Employment” says fewer than half of employers believe new graduates are adequately prepared for entry level positions. When asked the same question, nearly 90 percent of educators think these graduates are adequately prepared. Part of the problem is that students are highly educated but not in subject areas that employers covet.

And it’s not just different subjects. Educators say they are teaching students how to think across many disciplines. Valid point. Employers respond that they can provide on the job training for specific skills. Companies report that students are strong academically but less able in real world practical problem solving—especially in working with teams of people.

The ability to convey solutions and manage highly diverse colleagues with different perspectives and experience is of greater value today than deep and specific knowledge of a subject.

We need a thoughtful talent management approach to a skills gap that includes subject matter, collaborative decision making, and practical solutions.

Closer linkages with companies and community colleges are helpful. In the bastion of higher education, business treads warily. But the engagement is certainly growing. Public/private partnerships have been formed and are working with outstanding companies like Rolls Royce Engines where research and development is tied closely to key academic and research initiatives at major Universities.

Every major business should have a board level advisor who is or was a University or College President or thought leader. These two power groups can find common ground. There is ample evidence at the major research universities—where some of the finest work on both sides can be monetized to mutual advantage—and students can see bridges to careers in development.

The twain can and should meet.

Another key place for attention is our crisis in college and junior college completion.

92 percent of part time students in America’s community colleges cannot finish their two year degree in four years.

Over 70 percent of high school students enter advanced training or education within 24 months of graduation. Three quarters will not graduate from that next level.

CUNY reports that nearly 80 percent of New York City high school graduates fail the admissions tests and need remedial classes.

We need laser focus help on getting these young people matriculated and graduated with specific programs to get them over the hump. Doing so will mean tens of thousands of dollars in increased earnings over their lifetime and fewer months spent in unemployment in the future.

Q: You’re section on the three major assassinations of the 1960s (of JFK, MLK, and RFK) was both an interesting inclusion, and a somewhat personal one for me—even though I wasn't alive at the time. Considering the great hope that was bound up in those three individuals, this must have been even more devastating. You write that “Glumness settled on the American psyche.” It’s personal to me, because when I think of my father’s life at the time I think of how he worked on Bobby Kennedy’s campaign, was almost there the night he was shot, and then saw Richard Nixon get elected, was drafted into the Army soon after that, and was stationed in Korea during the Vietnam War by the end of 1969—a vantage point from which he saw the resources for the Great Society’s war on poverty transferred over to the War in Vietnam. It reminded me that these large forces of history are also intensely felt on the personal level, and how that has a cyclical effect. Can you speak to that?

PDK: Amazing question. Before the world gained the confidence to challenge the faltering giant in 1973, we gave off unmistakable signals of distress. After decades of expansion our economy was flagging, and student unrest and racial division marked a loss of self and soul. Take just one year in the late sixties and see what events were saying about us and our psyche in the years after JFK was assassinated.

Consider 1968. What a year. Today we claim we live in times of upheaval but consider that one year and the jumble of feelings created. The American people were numb and glum as that year drew to a close.

Imagine a foreign leader watching in real time:

The year begins when two unimpeachable leaders, Dr. Spock and Yale chaplain William Sloan, indicted for encouraging draft violation.

Days later North Vietnam launches the Tet Offensive, a turning point in many Americans’ opinion of the war.

Weeks later, the voice of America Uncle Walter Cronkite decries the Vietnam conflict and castigates our leadership for being overly optimistic—and the misleading. Lyndon Johnson feels the earth shift beneath his feet.

A few weeks pass before a surge in youth volunteers leads one-issue candidate Eugene McCarthy to miss winning the New Hampshire Democratic primary against sitting president Lyndon Johnson by a mere 230 votes.

Two days later, Robert F. Kennedy—who has been Hamlet trying to decide whether to follow in his fallen brother’s footsteps—enters the race.

That very same day a massacre unfolds at the hands of U.S. troops in My Lai. America does not always recognize itself.

Things turn topsy turvey—the Democratic President plans to continue the war and the Republican challenger Nixon has a plan to get us out.

Two weeks later, President Johnson decides the agonies of Vietnam are preventing him from pursuing his Great Society with vigor, and announces he “shall not seek” re-election.

Four days later Martin Luther King is assassinated by a lone gunman. Fires rage and RFK calms an aching Indianapolis by saying “I had a member of my family killed… by a white man.”

North Vietnam and US emissaries commence the Paris Peace talks.

Exactly 60 days after the King assassination, another “lone gunman” shoots and kills RFK after the candidate’s victory speech, having won a clutch contest in the California primary.

Three days later King’s assassin, James Earle Ray is captured at Heathrow Airport fleeing to Brussels and then to Rhodesia. Amazing for a penniless criminal.

Richard Nixon is nominated by his party in Miami—his first win after losing the presidency and then ignobly the gubernatorial bid in California. Far from a natural charmer, Nixon almost immediately starts pedaling backwards by picking Spiro Agnew as running mate.

The Soviet Union invades Czechoslovakia, ending the Prague Spring and baring in plain sight the advance of the Soviet jackboot.

Six days later, Mayor Daley’s Chicago police invade the demonstrators at the Democratic Convention that nominates Hubert Humphrey in halting measure. Everything about the divisions in the party smells ominous for November.

The women’s liberation movement and members of New York NOW demonstrate and threaten to burn bras at the Miss America Pageant in Atlantic City.

George Wallace and Curtis LeMay (Former Air Force Chief of Staff) run as independents for President and V.P.

African American athletes flash the Black Power Salute from the podium at the Mexico City Olympic Games.

LBJ halts the North Vietnamese bombing.

Nixon is elected, winning 43% of the vote. Wallace garners 13.5% which is respectable for an independent. Combined the non-Democrats attract nearly 57 percent of the vote—a staggering achievement when you consider that Democrats have won every Presidential bid since FDR the New Deal in 1932, except for two terms of General Eisenhower.

A tide had most certainly turned. And the glumness on the American Spirit as the ‘60s closed had a powerful predictive value.


"Anyone who feels that gains outside our borders somehow come as a loss inside America is placing zero sum game theory in the way of a runaway freight train—and runaway trains don’t evade obstacles."


PREVIOUS:

Read more about Peter's motivation behind writing the book in yesterday's article on how Trouble Always Starts With a Great Question

NEXT:

Keep up with the author at peterdkiernan.com, and check back with us tomorrow as we wrap up the series with a few questions about business and books.






 

About Dylan Schleicher


Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.