Chrystia Freeland

YALTA, Ukraine — One of the paradoxes of our age is that we are simultaneously living through a time of positive economic innovation and also a time of the painful erosion of the way of life of many middle-class families.

Listening to Yuri Milner, the Russian Internet investor, at a conference in Ukraine a few days ago brought home this contrast. Milner is a billionaire thanks to his Internet investments: He has done well both in his homeland, supporting some of Russia’s most successful start-ups, and, even more spectacularly by venturing abroad, taking pioneering stakes in Facebook, Zynga and Groupon.

When Milner talks about the technology revolution, he paints a dazzling picture of literally unprecedented innovation, bringing tremendous savings and benefits to consumers.

But when you talk to economists about the impact of those same forces on middle-class jobs, you come joltingly down to earth. The revolution Milner describes is part of a sea change in how the economies of Western industrialized nations work – and one that is hollowing out the middle class.

The technology revolution has become so familiar – grandmothers are on Facebook and toddlers navigate YouTube on their parents’ iPads - that it is easy to forget how revolutionary it still is. But Milner, speaking at an annual conference held by the Ukrainian billionaire Victor Pinchuk, argued that it had just begun to radically reshape our lives. (Disclosure: I moderated many of the sessions.)

Milner’s focus is on what he calls the three big “stories” in business innovation: “platform,” “free” and “e-commerce.” By “platform,” Milner is referring to the ability of the breakthrough Internet companies to build their businesses using the work and ideas of others. One example is Amazon.com. Milner said that “about 2 million independent merchants are selling on the platform every day. And that adds up to $25 billion of annual sales.” If those merchants were housed in a brick-and-mortar mall, they would occupy a “space equal to the island of Manhattan.”

The second big strand of the Internet revolution that Milner homed in on is “free.” Here, again, Milner argues that something unprecedented is going on: Thanks to the revolutionary impact of “free,” massive global brands can be created almost overnight.

Milner’s final major trend is less abstract: e-commerce. Again, this is hardly a novel phenomenon. But what Milner thinks is new is the impact of e-commerce as it moves from being the sideshow to becoming the main event.

Today, Milner estimates that 6 percent of retail sales is done online. He believes that number will be 20 percent within a decade, and he thinks it will be 50 percent within two decades. That shift, Milner argues, will have a profound and positive impact on the world economy: an 8 percent increase in efficiency. Another predicted consequence is less benign: “a pretty significant job loss in the retail sector to the tune of 40 million jobs in the next 20 years.”

Milner is a winner in all three of his generation’s big revolutions: the collapse of communism, globalization and the technology revolution. So he is inclined to believe the disappearance of retail jobs will have a happy outcome: The vanishing, low-paying retail jobs will be replaced by better-paying technology work.

But economists who have been studying the impact of globalization and the technology revolution on the labor market in Western industrialized economies are less sanguine, at least in the short term.

John van Reenan, professor of economics and director of the Center for Economic Performance at the London School of Economics and Political Science, is one of the foremost students of this transition. He thinks the biggest impact of the e-commerce revolution, and its counterparts in sectors like the law or accounting, won’t be on the number of jobs in the economy; it will be on how well they pay.

“The worry isn’t the quantity of jobs; it is the quality of jobs,” he said in a telephone interview from his base in London. “Other jobs will appear, but they may not be very attractive jobs.”

Van Reenan believes this trend has already begun, with deep social and political consequences. “It is a continuation of the hollowing out of the middle class, which we have seen,” he said. “People will find it harder to support a middle-class family.”

We’ve been in this paradoxical place before. The American economist and politician Henry George described the tumultuous change that his country was undergoing in the 19th century in an 1879 best-seller, whose title says it all: “Progress and Poverty: An Inquiry in the Cause of Industrial Depressions and of Increase of Want With Increase of Wealth The Remedy.”

What makes today’s political economy so hard to come to terms with is that the thrilling innovation and the hollowing out of the middle class – the progress and the poverty – aren’t two inimical trends. They are, instead, opposite faces of the same coin. But that’s something we don’t like to talk about, either in the hot spots where innovation is happening, or in the depressed regions where its malign side-effects are being felt most acutely.

PHOTO: Digital Sky Technologies CEO Yuri Milner attends the eG8 forum in Paris May 25, 2011. The eG8 forum gathers “leaders of the Internet” to consider and discuss the future of the Internet and society.  REUTERS/Gonzalo Fuentes

George Soros made headlines this week with a striking proposal that to save Europe, Germany must “lead or leave.” The leadership part was familiar: Outside Germany, at least, it is becoming conventional wisdom that Europe will survive only if the Union’s behemoth provides more decisive leadership — and writes bigger checks.

The catch is that the rest of Europe, particularly its beleaguered so-called Club Med countries, doesn’t seem to be in much of a position to coerce Berlin to do anything. That is where Soros’s second alternative — leaving — comes in. In an interview in Vienna last weekend and in a speech in Berlin on Monday, Soros added his influential voice to a cluster of iconoclasts who have asserted that Southern Europe’s fate need not be decided in Germany.

If Germany is unwilling to lead, Soros argues, the Southern Europeans should ask Germany to leave. His prediction is that these currently sickly nations would do perfectly well.

“If Germany left, the common market could hold together and actually it would be a remarkable relief,” Soros told me. “The euro would fall in value, so the debt which is denominated in euro would also fall in value and the competitiveness of the debtor countries compared to Germany and the other creditor countries would greatly improve.”

In this scenario, the Club Med countries would benefit partly from the inflation and currency devaluation that their existing monetary marriage to Germany precludes. Their renaissance would also be based on their economic fundamentals, which Soros argues are strong but are being discounted by the markets because of the existing fiscal and monetary straitjacket.

“It’s remarkable, remarkable, when you look at the Latin euro, that is to say the euro excluding Germany, it actually compares very favorably, not only with Britain, but with the United States and Japan,” Soros said.

“A Latin euro, where the members formed a fiscal union and would therefore go to introducing euro bonds, would be able to borrow at rates comparable to Japan, theUnited States and the United Kingdom. They would rank equally on the macroeconomic basis, if you compare them in terms of total indebtedness and deficit.”

Soros argues that Europe couldn’t survive the exit of one of its weaker, southern members but that it could weather the “amicable” departure of Germany.

“If Italy or Spain left, not only the euro but also the common market and the European Union would fall apart,” he told me. “Whereas if Germany left, the common market could hold together.”

Soros acknowledges that a German departure would be “a big dislocation” and a “shock,” but he thinks that the euro and the financial arrangements it supports would endure. This is, mildly put, not the consensus view.

Yet Soros knows a thing or two about currencies and bonds, which is why his economic policy prescriptions carry such weight.

He is also one of the millions of Europeans with experience of death and destruction. As a teenager, Soros hid from the Nazis in occupied Budapest; a couple of years later, still in his teens, he fled the Communists to make his way, penniless and alone, in Western Europe.

That personal history helped to inspire the second part of Soros’s message: of the promise and the peril of Europe. When it comes to peril, Soros warned that existing policy is sorting the Continent into two tiers. This Europe, he said, “is divided into debtors and creditors, with the creditors led by Germany being in charge and calling the shots and the debtors relegated to an inferior status which is threatening to become permanent.”

The historical precedent, he noted, was grim: “After the First World War, when the French imposed reparation payments on Germany, then they were sort of the tough taskmasters, they occupied the Saar, and the result was the rise of Hitler. It really would be a tragedy if Germany now fell into the same trap.”

Now for the promise: Soros remains a committed European, passionately supportive of the moral idea that animated European convergence.

“The European Union,” he said, “was meant to be an association, a voluntary association of equal states, each of which is devoted to the principles of democracy, rule of law, human rights, sacrificing part of their sovereignty for the common good.”

Millions of bitter experiences like those of the Soros family were the most powerful reason Europeans vowed never again, and embarked on their ambitious unification project. Soros notes that a successful European Union is important far beyond its borders.

“A united and prosperous Europe, devoted to the principles of open society, is very much needed by the world,” he told me. “I have a network of foundations working in various parts of the world, and I can give you personal testimony of how important it is to have a Europe that is strong enough to project its influence in the rest of the world. Take, for instance, the transformation that’s taking place in Burma, or in some of the African countries; there’s a very positive role that the European Union can play.”

As Europe teeters from one crisis to the next, Soros reminds us all that at its heart, the European Union is about more than deficits and currencies and bonds. Europe is also a political and moral idea — one very much worth preserving.

PHOTO: Billionaire investor George Soros speaks at a forum Charting A New Growth Path for the Euro Zone during the annual IMF-World Bank meetings in Washington September 24, 2011.   REUTERS/Yuri Gripas 

If there had been an empty chair at the Democratic convention this week, its ghostly occupant would have been Ronald Reagan.

Barack Obama admiringly referred to Reagan’s transformational presidency during the 2008 election campaign. That enraged the Clintonites, but then-Senator Obama’s take on the historical shifts in American politics was absolutely right. If you doubt that, just think back one week to the Republican convention, which was above all a coming-out party for Reagan’s 21st-century heirs.

Reagan’s legacy is so powerful because he identified the state as the central issue in American politics. That is still true today. Both in Tampa, Florida, where the Republican promise was to shrink the state, and in Charlotte, North Carolina, where the Democrats’ promise is to transform the state into a more effective servant of the middle class, the big question is what government should do, and how big it should be.

In 2008, Mr. Obama identified the force of Reagan’s leadership because he aspired to have the same impact. But the problem for him — and for American liberals in this century more broadly — is that the task they have set for themselves is both harder to do and, crucially, harder to explain.

That argument is made eloquently in a newly published essay on the Obama presidency by Theda Skocpol, a Harvard professor and one of the country’s foremost political theorists. If you read only one book about Mr. Obama this electoral season, read “Obama and America’s Political Future,” the slim volume that includes Dr. Skocpol’s essay and three smart responses. Together, they rise above the tick-tocks and polemics that characterize too much of the United States’ political writing.

Dr. Skocpol’s starting point is the comparisons between Franklin D. Roosevelt’s New Deal and Mr. Obama’s ambitious plans — often described as a New New Deal — that were often made at the beginning of his administration. But that parallel, which was drawn by insiders as readily as by outsiders, misses one crucial historical difference: F.D.R. built the state from scratch, while Mr. Obama is trying to overhaul a massive state machine that has existed for decades.

“The things that happened in the 1930s were unprecedented in peacetime,” Dr. Skocpol told me. “That was hard, but citizens could get a sense that something new was happening. What is different for Obama is that there is a very elaborated federal apparatus that already exists.”

It is the difference between a start-up and turning around a big, troubled company, or, to use a more domestic metaphor, between building a brand-new house and renovating an old one.

“We know from economic and technology history — it is easier to fill a space for the first time,” Dr. Skocpol said. “This is the same principle.”

Dr. Skocpol, who describes the Obama effort as “redirecting” the state, believes that task is difficult for many reasons. One is that change usually antagonizes vested interests; another is that, as the Obama administration has certainly shown, it often increases complexity.

When it comes to Election Day, renovation has a further, powerful disadvantage, compared with starting from scratch. When you build on a greenfield site, it is easy to show what you are doing and to explain how it is new. When you are working on a brownfield site, it is a lot harder to demonstrate what you’ve actually accomplished.

In the United States, the job of redirecting the state is further complicated by a phenomenon the author of another essay in this volume describes as the “submerged state.” Suzanne Mettler, a political science professor at Cornell University in New York State, coined the term to describe “a whole number of public policies in the United States that are hard for people to perceive as such because of their design.”

The submerged state lurks most massively in tax policy, which provides huge benefits, but ones that are largely invisible to their recipients. The result is the familiar American paradox of beneficiaries of government largess who passionately call for a shrinking of the state.

“A lot of people derive a lot of benefits from public policy, but they don’t recognize that the government is assisting them, so they are less likely to support government,” Dr. Mettler told me. She cited a survey she did in which only 43 percent of respondents admitted to ever getting help from the government. When asked about specific programs, though, 96 percent turned out to have benefited from state largess.

When it comes to the campaign trail, the easiest platform is a start-up — Americans love the shiny new thing. Next best is demolishing something that’s old and rotten — the appeal of Representative Paul D. Ryan’s radical rhetoric is no accident.

Hardest of all is to promote a painstaking, time-consuming renovation — which is exactly what U.S. government needs and what Mr. Obama, at his best, has promised to accomplish. To succeed, he needs to understand how different his new deal is from F.D.R.’s and why his transformation is a harder sell than Reagan’s was. He needs the courage to remove the cloak of invisibility from America’s submerged state. And when it is revealed to Americans in all of its complex and inefficient glory, he needs to come up with a clear plan not to make it bigger, but to make it better.

PHOTO: Former U.S. Speaker of the House Newt Gingrich and his wife Callista narrate a tribute to former President Ronald Reagan during the final session of the Republican National Convention in Tampa, Florida, August 30, 2012.  REUTERS/Adrees Latif 

This U.S. election campaign is being billed as a battle of big ideas. That is a good thing. But it is a shame that the fight is not being waged in the 21st century.

In choosing Representative Paul D. Ryan as his running mate, Mitt Romney swapped his Massachusetts pragmatism for a proudly ideological commitment to limited government. The Democrats, by contrast, believe in the essential role government plays, and are willing to raise taxes, at least on the rich, to pay for it.

This a clear and important battle line in the United States. But the argument over the size of the state comes with little regard for the very particular economic realities of this era. Like generals fighting the last war, U.S. politicians are solving the economic challenges of the past century.

That is a problem because we are living at a time of deep and fast economic change. The intuitive sense that the economy is becoming less predictable and less secure is right. Thanks to globalization and the technology revolution, the nature of work, the distribution of the rewards from that work and maybe even the economic cycle itself are being transformed.

But one would not know it from the U.S. political debate, whose familiar melodies of small state versus large state, higher taxes versus lower taxes and the importance, or not, of balancing the budget could have been played in any decade since World War Two.

Most people in the United States are comfortable with these old songs – everyone knows the words – but they are an inadequate response to the new economic demands of the 21st century.

The economic reality is that, thanks to smart machines and global trade, the well-paying, middle-class jobs that were the backbone of Western democracies are vanishing. Neither Mitt Romney’s smaller state nor Barack Obama’s larger one will bring them back. That is because the paradoxical driver of this middle-class squeeze is not some villainous force – it is, rather, the success of the world’s best companies, many of them American.

The record profit at Caterpillar, for example, is a tribute to the company’s skill at operating in a global marketplace and adopting cutting-edge technologies. But, for some Caterpillar workers, that good news recently translated into a six-year wage freeze, which union employees accepted after a strike in Joliet, Illinois, failed to secure a better deal.

This is the knottiest economic problem of our time: figuring out how to manage an economy whose engines of growth are enriching the few but squeezing the many.

Instinctively, Americans understand this is happening. That is why the Democratic ticket, despite the complaints of some of its wealthy backers, has stuck with its critique of Romney’s former company, Bain Capital, as an outsourcer of jobs. The point that middle-class workers sometimes suffer from the same decisions that increase shareholder value is one that many Americans know from their own life experiences.

But what neither party likes to talk about much is that this socially malignant outcome is being driven at least in part by the forces of free-market capitalism that most people welcome. The attacks on outsourcing do not convince everyone, because they know that Obama has no intention of outlawing it – and that if he did, the economic impact would be devastating.

The tempting answer, which I heard most recently in an interview with Glenn Hubbard, an economic adviser to Romney, is to optimistically assume that, just as the early traumas of the Industrial Revolution gave way to widespread prosperity in much of the world, the economic transformations of today will eventually work out.

“If you were to go back to 1940 and have this debate, we might worry, well, what if people are going to lose their farm jobs?” Hubbard said. “Then the debate was over manufacturing, then over service. And if an economist is honest with you, the best he or she can say is, what we need to do is allow those opportunities to happen, and they will.”

There are a few problems with this happy prediction. The first is that, while the Industrial Revolution did, indeed, eventually make ordinary people richer than at any other time in human history, it took two world wars and Communist revolutions in Russia and China for the world to iron out the kinks. The second is that, to make industrialization work, the West created an elaborate set of new political, social and economic institutions, including universal public education, trade unions, and the social safety net.

It took more than the spinning jenny or the steam engine to transform local, agrarian, family-based communities into national, urban, individualistic ones. New political and social institutions will be needed to midwife the latest shift into global and virtual communities. Inventing those institutions is hard, and talking about them can be frightening, but that is the political conversation the Western world should be having today.

If you aren’t American, the possibility that this election could hinge on abortion rights may seem absurd. Surely the stagnant world economy, the relative decline of U.S. power and climate change, just to name three, all trump reproductive freedom as issues that should be at the top of the national agenda.

But up close the focus on abortion is less bewildering. If, like Todd Akin, the Missouri congressman whose comments about rape focused the United States’ attention on the subject of abortion this week, you believe embryos are full-fledged human beings, no issue is as important as what you view as the continuing and legal murder of these innocents. If, on the other hand, you are a woman of childbearing age who happens not to share Akin’s beliefs, no issue is as important as the right to control your own body, which the congressman’s view threatens.

Having said all of that, the spotlight on abortion rights is also the product of a family feud inside the Republican Party. Republican grass-roots activists are desperate to propel the issue to the top of the national agenda, while the party’s elders — and their presidential nominee — are equally desperate to stop us all from talking about it.

If Mitt Romney has his way, the focus will eventually swing back to the issue that most voters spend the most time thinking about: the economy. And if that happens, a man worth talking to is R. Glenn Hubbard, a top Romney adviser who served as the chairman of George W. Bush’s Council of Economic Advisers and is now the dean of Columbia Business School.

Hubbard sees this election as one that offers Americans a sharp choice about the kind of country they want to live in. “The real issue for the public is to figure out which narrative do we want,” Hubbard said in a conversation in his office on the Columbia campus this week. “We can have a bigger government, if that’s the public’s choice. It’ll just require higher taxes on every American.”

“Do you want that,” he asked, “or do you want smaller government, smaller taxes?”

Hubbard is right that the ideological choice U.S. voters face when it comes to the economy and, indeed, the nature of their country more broadly, is clear and significant. There’s a reason the political debate is so polarized right now: The United States is at a very real crossroads.

While both parties are happy to describe this contrast in broad terms, when it comes to explaining their visions in more than a single sentence each side is unwilling to trust voters to understand the full implications of their position.

The Republican hypocrisy is to promise lower taxes, a balanced budget and spending cuts that avoid curtailing the essential government services Americans cherish. Eliminating waste and making the state more efficient only goes so far, and Republicans are reluctant to spell out just how much the state would have to shrink to allow a President Romney to both enact his promised tax cuts and balance the budget.

There is, of course, another way to square Romney’s fiscal circle: to adopt the credo of former Vice President Dick Cheney, who argued that Ronald Reagan proved that deficits don’t matter. Under this approach, a Republican administration would focus on cutting taxes first and leave balancing the budget for a little later.

The point of hypocrisy is to say one thing and to do something rather different. But even in these pre-election days of talking points, Hubbard makes very clear that the ticket shared by Romney and Paul Ryan has absolutely no interest in British-style shock therapy.

“Definitely not,” Hubbard said, when I asked him whether Romney was proposing a British scenario. “Part of the problem in Europe and in Britain is that austerity has the impression that we have to make every change today. That’s not true in Europe and it’s especially not true in the United States. What we need is a glide path to fiscal sustainability. It doesn’t have to happen today.”

Call it closet Keynesianism, with a 2013 stealth stimulus disguised as deep tax cuts. That is what many of Romney’s moneyed Wall Street supporters are hoping for — with a further, Nixon-goes-to-China expectation that a tax-cutting President Romney would have the best chance of taming the die-hard Republican deficit hawks in Congress.

The Democratic hypocrisy also involves squaring pledges about taxes with promises of fiscal prudence. President Barack Obama vows to maintain a supportive state — and to extend health care coverage — while not raising taxes for the middle class, and eventually balancing the budget.

This math, as Hubbard pointed out, doesn’t work either. The state programs that many Americans depend on today cost more than what they pay in taxes. Increasing taxes on the rich will help, but that is not enough. Yet, just as the Republicans won’t admit that they can’t balance the budget and cut taxes without shriveling the state to levels many Americans would not tolerate, the Democrats won’t tell you that the more generous state they believe in will only be sustainable if quite a few Americans pay more for it.

You get what you pay for — there’s a message I think American voters are smart enough to understand.

We all know it would be virtuous to spend more time pondering the implications of globalization and the intricacies of high finance. But these aren’t always the most enticing subjects to study, especially in the languid, fading days of August. For an easy-listening approach to two of the most important themes of our time, you could do worse than devote an evening to the film “Supercapitalist,” a new financial thriller set in Hong Kong.

The most immediately striking take-away from “Supercapitalist” is the moral hierarchy it imposes on business. The only truly virtuous capitalists are the technologists – hard-working, creative and focused on innovations that will help ordinary people as well as the bottom line. Next best are the makers of real things, in this case a logistics company. Worst of all are the financiers, a treacherous, murderous bunch who care only about making money even if the price is human lives.

In light of the public attitude toward bankers, those who work for Mitt Romney should watch this film and talk to its star and screenwriter, Derek Ting. That’s because Ting has made a film that raises some provocative political questions, but his personal agenda is entirely artistic: He set out to tell “a universal, human story.” His ethical ranking of business, with the money changers emphatically at the bottom, is an instinctive choice, not an intellectual one. That says a lot about current views on the subject, even on one of the world’s most energetic capitalist frontiers.

Ting’s exploration of globalization is more nuanced and more self-conscious. Supercapitalist, which moves from boardrooms and shipping yards to casinos and bars filled with call girls, does a fine job conveying the mood of a city in the throes of rapid economic transformation. Ting told an audience at a screening in New York that Hong Kong, where he lives, is “a make-it-happen town.”

“The stakes are very high in Asia,” he told me later. “It is a teeter-totter. Things are shifting eastward. It is something we can’t ignore. There is massive growth and opportunity.”

It is instructive, and fun, to catch a glimpse of some of the tastes, colors and flavors of this rising China, but that story itself is familiar. That’s why Ting’s variations on the theme are so welcome.

One is that the rapacious capitalist villains are white Americans (one of them, inevitably, an investment banker at “Silverman Brothers”) and their victims are hard-working, family-minded Chinese businesspeople. At a time when the United States is worried that Chinese capitalists are eating their Yankee lunch, Ting’s Hong Kong-nurtured perspective is a valuable counterpoint.

Another notion, which is touched on by the film and figures prominently in Ting’s own life, is how, for today’s generation of hyphenated Americans, the American dream is being inverted. It remains a central truth on the presidential campaign trail that the United States is the land of opportunity, to which the world’s huddled masses continue to flock. But the protagonist of “Supercapitalist” is the son of immigrants who seeks his fortune by going back to his family’s homeland.

To appreciate what a swift and profound shift that is, consider how Ting’s own parents reacted to his decision to move to Hong Kong.

“They really didn’t want me to go back to Asia,” said Ting, who was born near Westchester County, which is north of New York City, and whose parents are ethnic Chinese from the Philippines. “They said: ‘We moved here so you would have a better life.”‘

The final issue “Supercapitalist” raises is the fluidity of national identity in the age of globalization.

The film’s real-life back story is an aspect of identity politics that isn’t new at all: the lack of starring roles for Asian-American men. It is an issue Ting is a little reluctant to talk about. “I didn’t want this to be just about being Asian-American,” he said. “I mean, what year is this already?”

But he admits that a powerful motivation for making the movie was to create a lead role for himself. “I realized even if I train hard, even if I’m the best actor – which I’m not – it won’t make a difference if the opportunity isn’t there,” he said. Pursuing that vision took grit; some potential financial backers told Ting he could raise a lot more money if he made the star white.

Ironically, the film points out that when they get to Asia, Asian-Americans like Ting and the protagonist of “Supercapitalist” are seen first and foremost as Americans.

As for Ting himself, he says his identity depends on where he is. “A lot of us feel, you go to Hong Kong, you feel more American,” he said. “You come to the U.S., and you feel more Asian.”

That mixed identity can be uncomfortable – it can be hard to be a perpetual outsider. But as the global economy becomes more interconnected, Ting thinks belonging to many places is becoming an advantage.

“We can bridge both cultures, which is a strength when Asia is on the rise,” he told me. “The world is becoming much more global, and that puts our types in a very interesting position to bring the world together. There is a new global citizen emerging.”

Forget America’s fiscal cliff, Europe’s currency troubles or the emerging-markets slowdown. The most important story in the global economy today may well be some good news that isn’t yet making as many headlines – the coming surge in oil production around the world.

Until very recently, our collective assumption was that oil was running out. That was partly a matter of what seemed like geological common sense. It took millions of years for the earth to crush plankton into fossil fuels; it is logical to think that it would take millions of years to create more. The rise of the emerging markets, with their energy-hungry billions, was a further reason it seemed obvious we would have less oil and gas in 2020 than we do today.

Obvious – but wrong. Thanks in part to technologies like horizontal drilling and hydraulic fracking, we are entering a new age of abundant oil. As the energy expert Leonardo Maugeri contends in a recent report published by the Belfer Center at the John F. Kennedy School of Government at Harvard, “contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption.”

Maugeri, a research fellow at the Belfer Center and a former oil industry executive, bases that assertion on a field-by-field analysis of most of the major oil exploration and development projects in the world. He concludes that “by 2020, the world’s oil production capacity could be more than 110 million barrels per day, an increase of almost 20 percent.” Four countries will lead the coming oil boom: Iraq, the United States, Canada and Brazil.

Much of the “new” oil is coming on-stream thanks to a technology revolution that has put hard-to-extract deposits within reach: Canadian oil sands, U.S. shale oil, Brazilian presalt oil.

“The extraction technologies are not new,” Maugeri explains in the report, “but the combination of technologies used to exploit shale and tight oils has evolved. The technology can also be used to reopen and recover more oil from conventional, established oilfields.”

Maugeri thinks the tipping point will be 2015. Until then, the oil market will be “highly volatile” and “prone to extreme movements in opposite directions.” But after 2015, Maugeri predicts a “glut of oil,” which could lead to a fall, or even a “collapse,” in prices.

At a time when the global meme is of America’s inevitable economic decline, the surge in oil supply capacity is an important contrarian indicator. Maugeri calculates that the United States “could conceivably produce up to 65 percent of its oil consumption needs domestically.” That national energy boom is already providing a powerful economic stimulus in some parts of the country – just look at North Dakota. Crucially, at a time when one of the biggest social and political problems in the United States is the disappearance of well-paid blue-collar work, particularly for men, oil patch jobs fill that void.

What Maugeri dubs the next oil revolution also has tremendous geopolitical implications. One way to understand the battlegrounds of our young century is through the pipelines that flow beneath them. The coming surge in oil production, particularly from North America, will transform that geopolitical equation.

Equally significant is the impact of oil on the most important human problem of our times: protecting the environment. The sources of oil that will fuel the coming boom are harder to reach than the supplies of the 20th century, and the technologies required to extract them are more invasive. That will be one fault line in what is sure to be the escalating battle between environmentalists and the oil industry.

The implications for the climate change debate are even more fraught. Until now, the arithmetic of oil supply and the agenda of environmentalists conveniently dovetailed. Since we were running out of oil anyway, environmentally motivated efforts to limit fossil fuel consumption and increase our use of renewable energy boasted the additional virtue of being inevitable. In an age of abundant oil, those economically utilitarian arguments lose their power.

For environmentalists, and for the liberal political parties with which they are usually aligned, that poses a serious challenge. The temptation will be to oppose new oil production projects indiscriminately. That instinct could be politically dangerous. Political progress in combating climate change has been slow, but the battle for hearts and minds, especially of the younger generation, is being won. That political capital can be lost in an instant if the environmental movement allows itself to be equated with opposition to one of the lone sources of growth – and of good blue-collar jobs – at a time of global economic stagnation.

A final conclusion to draw from the next oil revolution is a little more existential. This is yet another reminder that what both common sense and expert consensus assure us to be true very often isn’t. It was obvious that efficient markets worked and financial deregulation would stimulate economic growth, until the financial crisis and the subsequent international economic recession. It was equally apparent that we were running out of oil – until we weren’t.

Do you think cutting-edge scientists should earn as much as star athletes, celebrity artists or Wall Street bankers? The Russian billionaire investor Yuri Milner does, and this week he put his money where his heart is.

Milner deposited $3 million in the bank accounts of each of the nine theoretical physicists he judged to be doing the most brilliant work in their field. They are the first recipients of the Fundamental Physics Prize, a new honor created by Milner. It is the most lucrative academic award in the world, and will henceforth be given to one winner each year.

Milner, who studied physics for a decade before making his fortune in prescient Internet investments, said he decided to create such a rich prize because he thinks the compensation of top scientists is out of whack in 21st-century society.

“I wanted this amount to be meaningful,” Milner said by telephone from Moscow. “I think top scientists need to be compensated at a different scale in society. Somebody with experience will tell you that true scientists are not motivated by money – they are motivated by the quest itself. That is true. But I think an additional recognition will not hurt.”

The sums certainly made an impact on their recipients.

“I was really stunned. It didn’t seem real,” said Alan Guth, a professor of physics at the Massachusetts Institute of Technology. “It is hard to believe when someone calls you and says you’ve won a $3 million prize.”

Guth first learned of the award two weeks ago. The money was wired to his bank account a week later. Guth said he suspected the organizers understood that physicists might be suspicious of a cold call from an unknown man with a Russian accent asking for their bank account details so he could transfer $3 million. So another winner, Nima Arkani-Hamed, called Guth and let him know what was coming. Milner phoned the next day.

Arkani-Hamed was just as astonished when he first heard about the prize. “Of course, I was flabbergasted, both by the incredible generosity of the prize as well as by being included in a list with so many heroes of the field,” he wrote in an e-mail.

The prize springs from Milner’s intense passion for physics and his belief that it is one of the pursuits that defines and ennobles us as human beings.

“Science is one of a handful of things that defines us as a very special species,” Milner said. “It is amazing how far we have been able to get and how accurate our predictions are. I think understanding how the universe was born is very important. It really gives us a perspective on many things.”

That’s why his award focuses on theoreticians, including those whose work has not been verified by experiments, and on ideas that may have no practical use – at least not one we can think of yet.

“It is hard to think of practical applications of the black hole,” Milner said. “Because practical applications are so remote, many people assume we should not be interested. But this quest to understand the world is what defines us as human beings.”

Future winners will be chosen by previous recipients, but the inaugural group was selected by Milner himself. He is modest about his own scientific talents. Physics, he said, “was not for me. Looking at where I am today, I think I was not qualified enough. You truly have to be very, very smart and very, very hard-working.”

But Guth said he was “very impressed” by Milner’s list: “It did surprise me he did as well as he did.”

A major goal of the awards is to raise public awareness of physics, partly through the popular lecture each winner will be invited to deliver.

“This is an encouragement for them to do a public talk and explain what physics is about,” Milner said. “The problem is that modern fundamental physics is so far from you and me.

“The mathematics has become so much more complicated that you need at least 10 years to understand it,” he said. “Fundamental physics has advanced so far from the understanding of most people that there is really a big disconnect.”

That is a problem, he believes, and not only because it deprives so many of us of an understanding of one of the most beautiful and consequential human undertakings.

Big future discoveries in physics will require massive, global public investment, and we will be prepared to support that only if we understand what our scientists are up to. The winners, Milner said, were enthusiastic about this part of the project.

These are grand ambitions. But the question Guth has been asked most often this past week is what he will do with his prize. He sighed gently when I put that query to him yet again.

“My wife and I talked about it a little but then decided we’re too dazed,” he said. “When we get over the shock, we’ll decide what to do.”

Why have the rich turned against President Barack Obama?

That has been a persistent theme of this campaign: We were reminded of it at the beginning of this week, when Mitt Romney’s team raised more money than the president’s for the second month running, and more colorfully in weekend reports of the Republican candidate’s lavish fund-raisers in the Hamptons.

If you were a Martian, or even a European, the animosity of America’s 1 percent toward the president might be rather mysterious. Although those at the bottom and in the middle are still suffering from the downturn that began in 2008, with unemployment above 8 percent, the affluent economy has bounced back quite smartly. The stock market has recovered, corporate coffers are overflowing with cash, and the luxury goods market is booming.

Even Wall Street, where hostility toward the White House is especially acid, has reason to be grateful. Bankers got the biggest government bailout of all – much more than laid-off workers or beleaguered homeowners received from this Democratic administration – and the president resisted calls from the left to nationalize the banks he rescued, as did the British.

Part of the answer is simple self-interest. As the economics writer Matthew Yglesias has argued, there is one easy and obvious explanation for the animosity of the rich toward the incumbent: He wants to raise their taxes significantly. That is certainly right. On Monday, Obama reiterated his support for letting the Bush-era tax cuts for household incomes of more than $250,000 expire, while keeping the lower rates in place for everyone else.

This is a powerful point. It can be tempting to imagine that the affluent might fret less about their tax bills than the poor, who are struggling to get by, but the elaborate tax avoidance strategies of superrich Americans suggest otherwise.

But this is about more than bank balances. Some of Obama’s most vehement critics in the private sector insist they are willing to pay higher taxes, if that’s what it takes to get the United States back on track. Their complaint, if you take them at their word, is instead with the president’s attitude toward them, toward their wealth and toward capitalism itself.

Their sense of insult is easy to mock: Do those testosterone-pumped Masters of the Universe really turn out to have the tender feelings of teenage girls? It is a mistake, though, to dismiss the outrage of the 1 percent just because it is so emotionally rendered. The truth is that Obama is telling a very different story about capitalism and its winners from the one Americans are accustomed to hearing, and it is no surprise that the rich don’t like it one bit.

Consider the two narratives on the campaign trail this week. In Colorado, Romney described those who make more than $250,000 a year with the Republican term of art — “job-creators.” And he warned that the president’s proposal to raise taxes at the top wasn’t bad just for the rich, it would hurt the whole country, too:

At the very time the American people are seeing fewer jobs created than we need, the president announces he’s going to make it harder for jobs to be created. I just don’t think this president understands how our economy works. Liberals have an entirely different view about what makes America the economic powerhouse it is.

Obama, meanwhile, insisted that “we love folks getting rich.” But his focus is different: “I do want to make sure that everybody else gets that chance as well.” One way to do that is to tax the rich. As a new television ad for the president argued this week, Obama’s plan is to “ask the wealthy to pay a little more so the middle class pays less, eliminate oil subsidies and tax breaks for companies that outsource.”

This is more than a fight about taxes. It is a fight about whether 21st-century capitalism is working for the American middle class and who should pay to fix it. The Republicans are telling Ronald Reagan’s story of trickle-down economics – the winners in the capitalist contest are “job-creators” whose prosperity helps everyone else. The wealthier they are, the wealthier all Americans will be.

The Democrats are challenging that win-win story of American capitalism. Their contention is that the U.S. economy is failing the middle class. They argue that those at the top need to contribute “a little more” to help rebuild the American middle. Even more threateningly, they point out, as in their critique of Bain Capital, that some of the business strategies that have enriched the elite have actually hollowed out the middle.

It is this last argument that most enrages the 1 percent – and it should. Obama’s most extreme critics delight in accusing him of being socialist and sometimes communist. That charge is not just overheated, it is plain wrong. But American capitalists are right to sense a challenge from the White House, which is about more than tax rates or bruised pride. The president is arguing that what works for the top of the United States isn’t working for the middle, and that is a criticism the country’s lionized elite hasn’t heard from its leader in a very long time.

Go to the Aspen Ideas Festival – or to any similar confab of affluent elites gathered to solve the problems of the world in luxurious, remote hamlets – and you can be sure that a dominant theme will be a lament for the vanishing political center.

Where, panel after panel will ask, are the wise moderates, able to seek compromise and rise above partisanship in pursuit of the public good? America’s biggest problems, and its inability to tackle them head-on, will usually be cited as the consequence of this lack of a sensible middle.

Most of the wealthy and well-positioned people in the rooms where these sorts of discussions are conducted see themselves as members of that sadly disempowered middle, so reflections along these lines are generally well received.

But the problem with this approach is its implicit assumption that politics, or at least policy, is a win-win game. Policies that serve the collective good are out there to be found, if only we publicly minded moderates were in charge.

But what if it isn’t just the political battle at the voting booth that is partisan, but the policies themselves, and their outcomes, too?

Take healthcare. The fierce battle over the U.S. healthcare overhaul is framed by both sides as an argument over which type of system would work better “for America.”

But what you think “works” depends very much on who you are. If you are uninsured, or fear you could be, expanding coverage is obviously a very good thing. But if you already have Cadillac coverage through your employer, and are confident you will keep it, then paying for more people to get on board might not seem like such a good idea.

A favorite issue for believers in the moderate middle is the budget deficit. It is held up as an example of the rabid partisanship and short-termism that threatens to destroy the U.S. economy. The usual consensus on how to avert impending doom is to put the wise moderates in charge and let them hammer out a compromise deal to both raise taxes and cut spending. That’s fair enough – and is almost certainly the eventual path the United States must take.

But what’s really striking about discussions of the budget deficit by the moderate middle is how overwhelmingly the issue itself has come to dominate the public debate about the economy, especially when those wise, nonpartisan people get together. A study last year by the National Journal found that the number of articles in five major American newspapers about the budget deficit eclipsed the number of articles about unemployment.

What’s especially remarkable about that imbalance is that while the deficit is certainly an issue the United States needs to tackle in the medium term, at the moment interest rates for 10-year bonds are near historical lows. The markets may not be wise, but they are nonpartisan, and as far as they are concerned there is no urgent fiscal crisis in the United States.

Meanwhile, unemployment remains above 8 percent and is having a dire and long-term impact on the people without jobs and on their families. That’s why Alan B. Krueger, an economist at Princeton who is the head of President Barack Obama’s Council of Economic Advisers, focused his talk at Aspen (which I moderated) on “the middle-class jobs deficit.”

“What I wanted to do in using that term is to highlight that this is a deficit, just like our fiscal deficit,” Krueger said. “We need to raise the jobs deficit to the same level as the fiscal deficit, if not above it.”

The U.S. jobs problem is even worse than the headline unemployment numbers suggest.

Heidi Ewing, a filmmaker whose documentary about Detroit was aired at Aspen and who was in the audience for Krueger’s talk, identified what is going on: “What we’ve noticed, from workers who got rehired recently, is they took a 50 percent wage cut during the bailout. So they’re coming back at $11 to $14 an hour. Do we really have to accept that this group of people is no longer the middle class we had in our minds before, but just the working poor?”

Thanks to what economists call the “polarization” of the labor market, if you are lucky enough to have a job in the United States you probably fall in either the top or the bottom of income distribution, but not in the middle.

Krueger touched on one of the most worrying consequences of this economically divided country: It will get worse over time.

Americans still imagine their country to be the land of opportunity, but the numbers tell a different story. Your parents’ income correlates more closely with your chance of finishing college than your SAT scores do – class matters more than how you do in class.

Which brings us back to the affluent moderates who congregate at conferences like the Aspen Ideas Festival. Whether they realize it or not, these sensible centrists are guided by their own self-interests, too. It just so happens that deficits are dangerous for them – they could bring higher taxes – while the jobs deficit has little impact on them or their families.

Today, the U.S. political center lives at the top. We shouldn’t be surprised by the shrieks of those who have been forced to the economic bottom and have chosen to move to the political fringes.