SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods. At the heart of the so-called American dream is this promise that if you work hard, you'll be better off than your parents were. And your kids will be, too. They'll be better off than you. Fifty years ago, this was true for most people. Nine out of 10 Americans were out-earning what their parents were at age 30. Nowadays, though, it's a coin toss. It's 50/50.
SCOTT GALLOWAY: It really is a fundamental breakage in the deal we have with each other and the deal we have in a society.
WOODS: Scott Galloway is a professor of marketing at NYU.
GALLOWAY: That's sort of what a society is supposed to do. That's the deal. I abide by laws. I work hard. I pay my taxes, and my kids will have the opportunities that, on average, are bigger and better than mine.
WOODS: Scott sees healthy economies as being like sailing ships powered by the middle class. But he says that today America, like some other rich countries, is kind of spinning in circles. Scott Galloway's new book, "Adrift: America In 100 Charts" is like a bleak PowerPoint presentation. Chart after chart hits you with these ways that the U.S. has strayed from the model of shared prosperity over the last several decades. So today on the show, a conversation with Scott Galloway on the most incisive statistics about the state of the American economy and what he believes should be done about it.
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WOODS: Scott Galloway.
GALLOWAY: Yes.
WOODS: How do you do?
GALLOWAY: Good. How are you?
WOODS: So I spoke with Scott about his new book, "Adrift," and it has 100 charts showing the state of America's economy and its health and its politics. I asked him what stat he found most striking.
GALLOWAY: Well, there are some kind of economic indicators that are sort of disheartening in, up until the 1970s, productivity in America - whether it was through advances in the technology, manufacturing, service economy - and wages are inextricably linked. So we sort of shared our prosperity and our productivity fairly equally. The shareholders did well. Workers did well. And then something strange in the early '70s happened, and that is those two lines began to disarticulate. And since then, in the last 50 years, wages on an inflation-adjusted basis have largely gone flat, but our productivity has been up and to the right. Every year, we produce more with less.
WOODS: Yeah. I mean, although I guess there was that exception at the start of this year, there's been a little bit of a decrease. But yeah, over the long run, the last 50 years, productivity has increased a lot. But it makes you wonder - where did all of that go? And you're saying it's to shareholders?
GALLOWAY: Yeah, we've optimized for shares. So these aren't accidents. These are the outcomes of policies and legislation that we have passed. That's the bad news. The good news is the prosperity is there. We have the productivity. We have the resources. We have the creativity. We've just decided to underinvest in the middle class. These are conscious decisions that can be unmade.
WOODS: So I just want to go through some of the charts in your book that I found the most striking. One pet thing about the American economy for me is the infrastructure. I remember when I first moved to the Bay Area to study, I was astounded by how rich the place was. But the roads were in terrible condition, and I was kind of flabbergasted by why this was. And the highways had more potholes than I was expecting. And your book has a chart about this. So tell me a little bit about infrastructure.
GALLOWAY: Well, on a per capita basis as a percentage of GDP, China now spends 10 times what we spend on infrastructure. Every year as a percentage of GDP, our investment in infrastructure goes down, and literally our bridges are collapsing. And what you have is a - you know, the shareholder class has said I can afford my own infrastructure, so I'd rather just have lower taxes. I'd rather not invest in infrastructure. And essentially a middle-class person, if they want a job in the city, they're more reliant on public transportation. And every year, public transportation in most metros degrades. So an investment in infrastructure is an investment in the middle class.
WOODS: You have a chart that talks about multinational corporate profits and the share that is booked in foreign tax havens. The increase in corporate profits booked in tax havens is just striking. I didn't realize that it was A, so low 50 or 60 years ago, and now it's so high.
GALLOWAY: It used to be nonexistent. It used to be pretty much the most profitable companies in the world were American, and all of their profits were taxed in America. Now, over half of profits are taxed in tax havens, and it's become a race to the bottom. Where Apple issues or licenses its IP to a subsidiary in Ireland, it's nothing but tax avoidance that cheats American citizens.
WOODS: Do you worry about killing the golden goose? Like, could policies such as making Silicon Valley pay more tax, stifle innovation?
GALLOWAY: I think everything's a balance. I mean, the reason why there was a rise of the shareholder class was they found that companies were run really inefficiently and weren't paying enough attention to their shareholders. And there was a rise of shareholder activism, and that probably made sense. There's always going to be a tension between capital and labor. I would argue the pendulum has swung too far towards shareholders, where we now optimize everything for shareholders.
WOODS: What do you make of the argument that a lot of the shrinking middle class in America is actually due to more households reaching higher incomes?
GALLOWAY: I think there's some truth there. I think there's been incredible prosperity. And I'm not even sure. So income inequality - I think people are cognizant of the problem. And it's still an issue, and I'm not sure it's getting any better. And also, happiness is a function of how you feel, relatively speaking. And when you have these platforms that are constantly shoving in your face that if you don't have abs and you're not vacationing at the Aman hotel, you're a loser - you know, we're just less happy.
WOODS: But it can't all be perception, and I don't think that's what you're arguing in the book. You're saying the middle class is actually being less prioritized and is doing worse off. So I'm just wondering how you square that circle.
GALLOWAY: Well, the question is - so I don't know if you saw Elon Musk's texts around the Twitter deal. The amount of money being thrown around via text, it just gives you a sense for just how much money some people have. And the question is, all right, I think most Americans are comfortable with people making that much money, but should they pay a lower tax rate? Should they be able to make most of their money in California and then move to Texas to recognize a lower tax rate? Should they be so powerful? And should we have a system where you spend a little bit of money on politicians and no antitrust legislation or regulation around privacy, around depressing teens or weaponizing our election can ever get through because these companies have become so powerful?
WOODS: You've shown a bunch of charts that, you know, show the storm clouds around the country. How do you personally cheer yourself up?
GALLOWAY: Well, there's a lot to be hopeful for. There's one wonderful chart in the book - the percentage of time being spent on helping people you will never meet is at record highs globally. Across every region, more people are spending more time planting trees the shade of which they will not sit under. That's a very hopeful thing. And I think America is exceptional, but some of that exceptionalism has come from a very basic notion that the American middle class is the most noble entity in history and warrants continued, massive investment.
WOODS: Scott Galloway, it's been a real pleasure having you on the show. Thanks so much for joining THE INDICATOR.
GALLOWAY: Hey, thanks for having me. Take care.
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WOODS: This show was produced by Corey Bridges and was engineered by Katherine Silva. It was fact-checked by Dylan Sloan. Viet Le is our senior producer, and Kate Concannon edits the show. THE INDICATOR is a production of NPR.
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