In recent years, a new economic paradigm has been gaining traction, challenging the long-held beliefs of both trickle-down and traditional bottom-up economics. Known as “Middle-out Economics,” this approach argues that a strong middle class is the true engine of economic growth and prosperity. At the forefront of this movement are thinkers like Eric Liu, Nick Hanauer, and Michael Tomasky, whose work is reshaping our understanding of how economies thrive.
Middle-out Economics posits that economic growth comes from creating a virtuous cycle of increasing consumer demand, business innovation, and broad-based prosperity. This stands in stark contrast to trickle-down economics, which assumes that tax cuts and benefits for the wealthy will eventually benefit everyone.
Nick Hanauer, a successful entrepreneur and venture capitalist, has been a vocal proponent of Middle-out Economics. In his widely-read article “The Pitchforks Are Coming… For Us Plutocrats,” Hanauer argues that extreme inequality is not just morally wrong but also economically unsustainable. He contends that a thriving middle class, with its purchasing power and entrepreneurial spirit, is crucial for long-term economic success.
Hanauer’s collaborator, Eric Liu, brings a unique perspective to the movement. As a former speechwriter for President Bill Clinton and a civic entrepreneur, Liu emphasizes the importance of civic engagement in economic policy. In their book “The Gardens of Democracy,” Liu and Hanauer argue for a new way of thinking about citizenship, the economy, and government. They propose viewing the economy as a complex adaptive system, more like a garden to be tended than a machine to be fine-tuned.
Michael Tomasky, a political journalist and editor, has also contributed significantly to the Middle-out Economics discourse. In his book “The Middle Out: The Rise of Progressive Economics and a Return to Shared Prosperity,” Tomasky traces the historical roots of progressive economics and argues for policies that support the middle class. He contends that the post-war period of shared prosperity in the United States was no accident, but the result of deliberate policies that can be reimagined for the 21st century.
Key policies advocated by Middle-out Economics proponents include:
- Progressive taxation to reduce inequality and fund public investments
- Robust public education and job training programs
- Support for labor unions and workers’ rights
- Investments in infrastructure and research & development
- Universal healthcare to reduce the burden on middle-class families and entrepreneurs
These policies aim to create a positive feedback loop: as middle-class consumers have more spending power, businesses have more customers, leading to job creation and innovation, which in turn strengthens the middle class.
The Middle-out Economics movement aligns well with the tenets of design economics. It acknowledges the evolution of economic systems, recognizing that the trickle-down model is ill-suited for our current realities. It embraces an interdisciplinary approach, drawing insights from history, sociology, and complex systems theory. And it promotes economic literacy by presenting economic concepts in accessible terms and encouraging public engagement in economic policy discussions.
As we grapple with challenges like income inequality, technological disruption, and climate change, Middle-out Economics offers a fresh perspective on creating sustainable prosperity. By focusing on building a strong, vibrant middle class, this approach seeks to create an economy that works for everyone, not just those at the top.
While still evolving, Middle-out Economics represents a promising direction for economic thought and policy in the 21st century. As more policymakers, business leaders, and citizens engage with these ideas, we may see a shift towards a more inclusive and sustainable economic paradigm.
Prompt: Vinny Tafuro | Composed: Claude 3.5 Sonnet | Edited: Vinny Tafuro