The Age Of Anxiety

America's debate over economic anxiety is veering off into the wild blue yonder. Business-bashing and tariff threats are replacing balanced budgets and tax cuts. With the economy slowing, the rhetoric could do real damage. The bond market is already throwing a fit, and the dollar is swooning.

There's no question that a lot of people have serious economic problems, to which presidential candidate Pat Buchanan is giving voice. Behind the statistics that show the U.S. doing just fine--low unemployment, low inflation, and lofty stock prices--there are millions of families struggling to get by. The voters attracted to Buchanan haven't had a raise in 20 years. Downward mobility is a constant threat, if not a reality.

Much of Buchananism is the worst sort of isolationism and scapegoating. His campaign repudiates the values of an entrepreneurial society for the crimped vision of a defensive America hemmed in by tariffs and electric fences. Economic anxiety may be natural to a society in transition to the Information Age, but there are steps to take without turning the U.S. into a xenophobic autarky. Here they are:

-- CEOs should share the gains. They should copy IBM, which just boosted merit pay and bonuses by 8%. With profits up 38.2%, CEO Louis V. Gerstner Jr. shared the wealth generated by the higher productivity of all the company's employees. A new BUSINESS WEEK/Harris poll shows that 95% of the public believe companies have responsibilities to their employees and communities that go beyond making profits. That may be. But companies can best fulfill their social responsibilities by paying for performance and training their employees.

-- CEOs should share the pain. CEOs are perceived as the enemy by a frightening number of Americans. It was a delusion to believe that chief executives could express indifference to the pain of layoffs without paying a penalty. It was hubris for CEOs to award themselves huge pay packages while their employees' wages stagnated. Boards would do well to penalize poor leadership.

-- Government policy must boost human capital. Tax incentives are currently geared to increasing bricks and mortar, not knowledge. The federal government spends billions on retraining programs, few of which work. Take the money, turn the programs into training vouchers, and give them to individuals and companies, who are close to the job markets. With college the defining wedge between haves and have-nots in America, tax incentives for tuition should also be considered.

-- Boost growth. Of all the things that should be done to increase wages and curb inequality, nothing is more important than simply raising the economic growth rate. For 100 years following the Civil War, the U.S. economy grew at 3.4% annually and wages doubled every 35 years. Each generation did better--until the '70s, when economic expansion slowed to 2% and average wage growth stopped cold. With inflation low and productivity high in manufacturing and probably services, there is room for raising growth to at least 3%. It will take action from corporate leaders, a change of incentives from Washington, and faster growth to cure the current economic anxiety. But these are remedies that can work--and not destroy the open society.

Before it's here, it's on the Bloomberg Terminal.