To protect America's way of life and standard of living, the Biden administration must take two critical steps. First, it should implement legislation designed to improve American free-market capitalism and strengthen the middle class. If not done soon, a political shift to the left is more likely later. And secondly, the administration must choose international engagement over isolation. Surprising to many, these decisions are connected.

American free-market capitalism has generated the greatest economic growth the world has ever seen. At the core of its brilliance is its ability to create incentives to produce solutions to problems and to distribute those solutions worldwide. To succeed, U.S. companies must have access to the world's 7.7 billion consumers. But global trends toward protectionism, which have accelerated due to Covid-19, stand in the way.

Today, there are approximately 3.8 billion middle class consumers. By 2030, this figure is projected to rise to 5.7 billion, according to the OECD. The vast majority will live in China, India and other Asian countries. American companies, no doubt, need greater access to these faster-growing markets.

Importantly, one in five American jobs is currently supported by international trade, says Business Roundtable, an association of chief executives of America's leading companies. Greater global engagement will ensure new opportunities that benefit both U.S. companies and workers.

But there's a problem. There are more than 300 free trade agreements around the world without U.S. participation. Since members of these agreements apply zero or low tariffs on each other's imports and higher ones on U.S. goods, this puts our companies at a competitive disadvantage. What can we do?

Currently the United States has 14 free trade agreements with 20 countries. What's amazing is this: nearly half of all U.S. exports are sold to these 20 countries, which represent only 6% of the world's consumers. When the playing field is leveled, American companies and workers can compete anywhere.

To boost job-creating exports to the rest of the world, the United States needs more, not fewer, free trade agreements.

In 2019, the U.S. unemployment rate reached record lows. But many Americans did not benefit. Now with the economic devastation caused by Covid-19, many more are at a big loss.

Better educated Americans can often keep their higher-paying jobs and work from home. Lower income Americans usually can't. Due to this and other factors, Covid-19 has hurt lower income Americans the hardest, according to a Pew Research Center.

In 2019, 44% of all U.S. workers aged 18 to 64 held low-wage jobs with median hourly wages of $10.22, says the Brookings Institution. That represented 53 million people struggling to make ends meet before the pandemic struck. What’s more, approximately 20% of men ages 25 to 54 were already absent from the workforce.

And there's more reasons why a large segment of the population is at a loss. Labor’s share of national income, the amount paid out in wages, salaries and benefits, has been declining since the 1980s, reports the McKinsey Global Institute. This has contributed to income inequality that is now greater in the United States than in other advanced economies.

Consequently, its not surprising that most Americans believe the economy is helping the rich, while hurting the middle class and poor, says a December 2019 report by the Pew Research Center. And since the 1970s, the American middle class has been eroding while many claim their ability to reach it has become nearly impossible. What does this mean for the future of free-market capitalism?

According to a November 2019 Gallup poll, only half of 18 to 39 year-olds viewed capitalism positively, down from 66% in 2010. And even before the pandemic put millions of people out of work, the opinions of young adults on capitalism had deteriorated to the point where socialism was tied in popularity. Today, it's likely even more Americans favor socialism — which always fails to deliver.

Free-Market capitalism incentivizes entrepreneurs to take risks, start new businesses and hire more workers. In turn, economic growth increases, and standards of living rise. But not all benefit.

Efforts to make free-market capitalism more inclusive and sustainable involving investments in education, healthcare, infrastructure, and safety nets, combined with policies to support global engagement, will have a tremendous upside. And very importantly, it will make it less likely that the political pendulum swings far left in the years ahead.

About The Author John Manzella [Full Bio]

John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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