The Big Squeeze

CAMBRIDGE: Competition is the root of progress -- all economics are built on that notion. From America to China, throughout the transition economies of Eastern Europe, competition is now the first commandment of economic life.

But does progress inevitably follow? In the rhetoric of the political right, competition brings only winners. In fact, for every winner there are losers. Market reforms may pave the road to progress, but they incite their own social problems. For as income distribution deteriorates, the middle class may melt away.

Look at America. Its economy is growing and stands near full employment. Yet median family income is barely above that of 1973. Between 1950 and 1973, indeed, real median family income doubled. Since then it has stagnated. Worse, more people per household are working, yet total family income has not risen.

Understanding the causes of this trend is critical because it is assumed that the capitalist model -- that progress is widely shared, trickles down, that a rising tide raises all ships -- works. If such metaphors are wrongheaded, either social policies must play an equalizing role or the model itself will become discredited. In the US, the first attacks have been on government; the Gingrich revolution is a form of populism that tells people that "their" hard earned money is being wasted. The next round of fire is likely to question the idea of competition itself.