‘Secular Stagnation’ and the Cheap Burger
What do Sheldon Silver, the European Central Bank, and McDonald’s have in common?

By
Holman W. Jenkins, Jr.
Jan. 23, 2015 6:21 p.m. ET
It may seem peculiar to link the arrest of New York Assembly Speaker Sheldon Silver with the European Central Bank’s latest monetary legerdemain. And even more peculiar to link both with the troubles of McDonald’s.
But Europe, Japan and the U.S. have been desperate to stir private-sector growth and yet refuse to consider how they treat their private sector. Europe gave itself austerity in which the private sector shrank and the government didn’t. Big-name economists keep insisting monetary policy can conjure growth without anyone having to question any ideological, political or policy embraces of the past three decades.
Nobody asks: How can we make our societies ones in which people find opportunity? They worry about the distribution of income but not the absence of income-creating opportunities for individuals.
The lesson of Sheldon Silver is that this phenomenon has mostly to do with a self-interested machine protecting its own privileges.
Mr. Silver, as you may know, is the long-serving speaker of the New York state assembly, a man the New York Times calls the state’s “most powerful Democrat” and the capital’s “most powerful figure.” He was arrested Thursday for millions of dollars in graft. Two decades of his “service” is why upstate New York is America’s microcosm of France, a place of permanent stagnation. It can’t even avail itself of fracking, as Pennsylvania and Ohio have done, because fracking displeases the disconnected New York City liberals whom Mr. Silver must propitiate to keep himself in power decade after decade.
McDonald’s has had two bad years, and sales are down sharply in the U.S. Meanwhile, Shake Shack is seeking an IPO on Wall Street that would value the tiny chain at $568 million.
This has led some to draw a line of causation, but McDonald’s doesn’t compete for the same customers and its real future may lie more in cost control than in imitating the boutique burger chains like Shake Shack and Five Guys.
McDonald’s has decades of experience in Europe and Japan, and can see where things are going. Our youth unemployment may be half of France’s, but it’s twice the rate that prevailed at a similar point in the 1990s recovery. Our new business formations are the lowest in 35 years, more like Europe than the U.S. According to Gallup, companies are dying faster than new ones are being born.
The administration’s Affordable Care Act raises costs for businesses like McDonald’s that hire thousands of full-time workers at a low wage. Its labor enforcers are overturning settled law to make McDonald’s liable for alleged violations of its independent franchises.
A writer for the New Yorker applauds academic studies showing that hikes in the minimum wage have only a small impact on overall employment, “usually confined to teenagers and unskilled workers”—i.e., McDonald’s workers.
President Obama himself, when he keeps intoning that every job should pay enough to support a family of four, is essentially saying McDonald’s jobs shouldn’t exist.
Though McDonald’s would never put it this way, the company has already started adapting. McDonald’s once filled its U.S. menu with salads, wraps and fruit options that few customers buy. The idea was to appease its foodie critics. Now the company is “simplifying” its menu and giving franchisees freedom to drop non-sellers—and the disproportionate staff needed to support them.
McDonald’s customers were never keen on customization, preferring speed and a cheap price. But now the company is introducing customization-friendly automated and smartphone ordering—because it allows franchisees to cut counter staff.
The essence of Europe’s malaise has long been a politics tilted heavily toward protecting those who have jobs from those who want them, where the biggest losers are the young and unskilled, and where stagnation is the general fate. Even with the bad news of recent years, McDonald’s U.S. stores still generate twice the sales of its competitors, including Burger King. But they also employ twice as many workers, upward of 50 per store. Look for that to shrink as McDonald’s adapts to an America becoming more like Europe, with an economy unwelcoming to the unskilled and unprivileged trying to find an entry into the world of work.