To Democrats, the decline of the Democratic Party over the past generation must seem inconceivable.  How could the 'amiable dunce' Ronald Reagan have won the presidency?  How could the bombastic Newt Gingrich have brought forty years of Democratic Congresses to an end?  How could the dim—witted frat—boy George W. Bush have been elected to the White House?

For over a decade the Democratic Leadership Council has been trying to tell them.  The latest effort, from William A. Galston and Elaine C. Kamarck, is 'The Politics of Polarization.' Angered by failure, they relate, Democrats have tried to win recent elections by mobilizing their base. The result has been to enlarge the base of both political parties.

The trouble is that the Republicans' conservative base is bigger

Rather than mobilizing the base, liberals should reach out to the moderate center, they argue.  But there is a problem here too. The Democratic base of liberal activists is an American outlier.  It is more educated, more prosperous, more single, and more secular than Americans in general.  In

'social issues and defense... Liberals espouse views diverging not only from those of other Democrats, but from Americans as a whole.'

But the Democrats' problem is even bigger than that.  In the first two—thirds of the twentieth century, the DLC says on its Third Way web site,

progressive reform brought fair labor standards, adequate wages, and decent benefits for workers. It also created the structures that brought wealth to the middle class — it increased college access, built highways, and electrified remote areas... [But now we live in] a global economy that is moving and changing at breakneck speed... [and] middle class Americans seem to have lost faith in progressive economic prescriptions.

What went wrong and what can progressives do to recapture the trust of middle class Americans?

Over in US corporate suites, people have been asking a similar question.

What is going on in the global economy and what should corporate leaders do to respond?  When the clients of management consultant McKinsey & Co. were asking that back in 1990, McKinsey realized it did not have an answer.  So it embarked on an in—depth research project on major business sectors around the world to find out what was going on.  The result, written by William W. Lewis, is The Power of Productivity, now out in paperback.

There is an excellent interview with Lewis by TechCentralStation.com editor Nick Schulz here.

Lewis's findings are startling.  His team found that the United States is the most productive nation in the world in almost all sectors, and likely to remain so.  For sure, in steel, autos, and consumer electronics the Japanese are marginally more productive.  But the big global industries in Japan contribute about 10 percent of GDP.  The rest of the Japanese economy—retail, construction, food processing—operates at half the productivity of the US.  It is 'inefficient, subscale, fragmented.'

What is the difference?  Wal—Mart, for a start.  Over the last generation Wal—Mart has driven a huge increase in retail productivity that has forced the rest of the retail sector to reinvent itself or die.  In the late 1990s during the great tech boom, half of US improvement in productivity was in humble retail.  In Japan, mom—and—pop stores are protected from competition by law.  The result is higher prices and a large subsidized labor force working at low productivity, dragging the rest of the economy down.

It is

'the productivity of every worker that matters... [It's] the productivity of the massive number of workers in retailing, wholesaling, and construction that give the United States the highest GDP per capita in the world.'

You can see the problem for the Democrats. Their progressive political faith is based on protecting American jobs, on favoring workers over businesses, on manipulating the economy with targeted subsidies, tax cuts, and credits.  They think that Wal—Mart is a problem, not an inspiration.
 
William L. Lewis says that the way to prosperity for the ordinary American is through global competition.  'The more intense and evenly balanced competition is, the faster the process works.'

Galston and Kamarck tell us why the Democratic political offering has ceased to work.  Most ordinary Americans, even conservative Democrats, 'believe in the politics of personal empowerment and that most people can get ahead with hard work.' They have lost the fear their Depression—era parents experienced when the progressive suits wrecked the economy with Smoot—Hawley tariffs, high government spending, high income—tax rates, and fixed wages and prices; they believe that they can thrive in the creative destruction of the market economy.  So they stop voting for Democrats.

For Democrats to do well the American people need to lose their faith in personal empowerment.  Short of that, Democrats need to lose their faith in 'progressive economic prescriptions.'

Christopher Chantrill (mailto:chrischantrill@msn.com) blogs here.  His Road to the Middle Class is forthcoming.