Brooks argues that these two economies have partisan characteristics - which might be worth pondering as we consider the differences between the two parties:
His work leaves the impression that there are two interrelated American
economies. On the one hand, there is the globalized tradable sector —
companies that have to compete with everybody everywhere. These
companies, with the sword of foreign competition hanging over them, have
become relentlessly dynamic and very (sometimes brutally) efficient.
On the other hand, there is a large sector of the economy that does not
face this global competition — health care, education and government.
Leaders in this economy try to improve productivity and use new
technologies, but they are not compelled by do-or-die pressure, and
their pace of change is slower.
A rift is opening up. The first, globalized sector is producing a lot of the productivity gains, but it is not producing a lot of the jobs. The second more protected sector is producing more jobs, but not as many productivity gains. The hypercompetitive globalized economy generates enormous profits, while the second, less tradable economy is where more Americans actually live.
In politics, we are beginning to see conflicts between those who live in Economy I and those who live in Economy II. Republicans often live in and love the efficient globalized sector and believe it should be a model for the entire society. They want to use private health care markets and choice-oriented education reforms to make society as dynamic, creative and efficient as Economy I.
Democrats are more likely to live in and respect the values of the second sector. They emphasize the destructive side of Economy I streamlining — the huge profits at the top and the stagnant wages at the middle. They want to tamp down some of the streamlining in the global economy sector and protect health care, education and government from its remorseless logic.
Republicans believe the globalized sector is racing far out in front of government, adapting in ways inevitable and proper. If given enough freedom, Economy I entrepreneurs will create the future jobs we need. Government should prepare people to enter that sector but get out of its way as much as possible.
Democrats are more optimistic that government can enhance the productivity of the global sectors of the economy while redirecting their benefits. They want to use Economy I to subsidize Economy II.
I don’t know which coalition will gain the upper hand. But I do think today’s arguments are rooted in growing structural rifts. There’s an urgent need to understand the interplay between the two different sectors. I’d also add that it’s not always easy to be in one of those pockets — including the media and higher education — that are making the bumpy transition from Economy II to Economy I.
