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Actually, in many ways, Wall Street benefits from the big public sector unions. The states’ enormous, albeit inadequate, pension assets are invested in equities and other exotic instruments peddled by Wall Street. Historically, government workers paid for more security, with lower wages. In exchange for smaller salaries they got job security and generous benefits. Eventually, they began to see their security as a right. With salaries matching private sector now, It seems government workers are now getting the better deal. Taxpayers are explicitly on the hook to make sure these contracts are honoured.

Once upon a time, America had a relatively good system for dealing with displaced workers. But the shallowness of its recessions and the rapidity with which employment tended to spring back led to complacency and neglect of these institutions. In Europe, by contrast, governments responded to persistent high unemployment with a wave of labour market reforms and investments in retraining and other measures to return workers to the labour force. Recent jobless recoveries have therefore left the American economy with a declining participation rate, while Europe has done better. Growth in trade with China contributes to the closure of the local textile mills, which significantly damages the local economy. The most skilled workers then leave; they can do better in growing towns nearby, and they probably have the financial resources to relocate. The low-skill workers left behind do not move. Why? Well, they may not be able to afford to do so, but other factors make staying in place more at...