The Debate Over Inequality
There is actually a major intellectual debate going on at the moment, not just Mike Huckabee screeds about women and their libidos, which was in line with all the other malevolent talking points that dominated the 2012 Republican election. This debate pits people of high intellectual quality against one another though to no one’s surprise it is an intramural affair between Democrats because no Republicans volunteer to have a fresh thought. The debate is pursued in media that engage on a number of different intellectual levels: newspapers, academic reports, television talk shows, Presidential political campaigns, and dinner table conversation. It is not as important as debates held in previous generations about manifest destiny, slavery, immigration, and women’s rights; those go to the very character of the nation. Those can be regarded as “existential” while the current debate can be regarded as “second order”. These debates set policy for a century or so, and in that way form the structure though only indirectly the soul of the nation. Among those, are the debates that took place over the union movement, Social Security and other entitlements, and even the debate about the interstate highway system, though there wasn’t actually much debate about that however much it meant the nation had decided to prefer automobiles to rail, and that had an impact on how the suburbs developed and so on the state of the cities and the politics of the nation for sixty years, which is how long these issues go before being revisited.
We have arrived at the point in the cycle where numerous issues that were thought to be settled just before or just after the Second World War are subject to review. That does not include only entitlements, where the attack on Obamacare is an attempt to cut into a reasonable extension of the sort of programs that were embarked on by the New Deal. It also includes revisiting the question of the security needs of a modern state and whether they impinge on Constitutional guarantees. That issue was important at the time of the Cold War, when national security required the development of a President with very strong powers, even to the waging of undeclared wars and launching nuclear annihilation without much in the way of Congressional consent, and now seems to require the collection of data about people and their conversations that at one time would have been forbidden and, at the least, requires a redefinition of the right of privacy. The current momentous debate I have in mind that is an example of this species of debate is the debate about inequality, though that title is misleading because it makes one side of the issue the focus of the debate. More objectively stated, this is a debate about whether America is in economic decline because the rich are doing so well at the expense of the poor.
One side, the one that affirms the proposition, says that the increasing inequality of the distribution of wealth in this country, as that is measured by, among other things, the increased disparity in the last thirty years between the one percent and the ninety nine percent of the population, is responsible for everything from the great recession to the slowness of the recovery from the great recession and the increase in the number of people struggling to keep themselves afloat, which means to maintain the same standard of living that their parents had. That a new generation would not be able to keep up or improve on the situation of their parents was something that was predicted would happen with the Baby Boom Generation, but is now forecast for the Millennials. In a nutshell, the argument is that the rich do not invest their ill gotten gains, but sit on their wealth or buy one another out, rather than create new industries, which they have no reason to do because consumers do not have enough money to buy new products and so it makes no sense for money holders to risk their money, which leads to a vicious cycle of lower investment and lower wages and a stagnant and faltering economy, one soon to be outpaced by China.
The advocates for this point of view are quite formidable. Indeed, they include those who are the most respected of Liberal commentators on public affairs. They include two Nobel Prize winners in Economics, Joseph Stiglitz and Paul Krugman, and also Robert Reich, a leading public intellectual long engaged in economic analysis who served as Clinton’s Secretary of Labor, and the noted journalist, Hendrik Smith. Krugman, for one, has been devoting his New York Times columns this week to this view, stating that the major spur to stagnant wages, low mobility and unemployment is inequality.
The inequality side of the inequality debate has a proud pedigree both intellectually and politically. It goes back to historian Charles Beard’s idea that the Founding Fathers wrote the Constitution so as to feather their own nests. John Kenneth Galbraith, the economist, argued that the rich people who served on boards of directors did not serve the interests of shareholders, much less the public, but the corporation executives they were put on the boards to hire, and that corporations therefore followed whatever policies they pleased, free to invest their money (or not) as they pleased, without anyone to answer to. And Seymour Martin Lipset, the sociologist, argued that the relative lack of income inequality was one of the parameters that make democracy possible as a system of government.
This side of the debate brings together Liberals and Populists. Liberals think rich people get away with alot and should pay more to provide services everybody but the rich need and that more rather than less government regulation leads to more rather than less production and productivity. Populists emphasize that the rich should be punished. Both the Tea Party, in its own shortsighted way, is against the rich, which it identifies with Washington, and Occupy Wall Street, in its much more clear way, was against Wall Street. FDR was in this camp, at least when he railed against “economic Royalists”, but it is to be remembered that he propped them up rather than took them down, which is also what Barack Obama did for the plutocrats in the financial services industries after the debacle they had created was over.
On the other side of the debate are those who dispute the basic proposition that inequality is the main reason for the moribund United States economy. They say, first, that things are not as bad as the doomsayers make out and, second, that there are structural issues in the economy and the society that account for its slow pace of development. Inequality is the result not the cause of the basic problem. The most recent proponents of this view that there are structural problems other than inequality that are the main forces for the declining fortunes of those who are not super-rich are the young hot shot economists who authored a study of upward mobility that was featured in the Times this past week and received some attention on the talk shows. Raj Chetty and the other authors of the National Bureau of Economic Research study “Where is the land of Opportunity?” claim that the economic fates of those other than the super rich are not as bad as those who point to the ever greater disparity between the income of the very top percent or two of the income ladder and every one else would have you conclude. Upward mobility is lower than it is in western Europe, something we have known for fifty years, but it is no lower than it has been for thirty years. By "upward mobility", they mean both how much better, as that is measured by tax returns, one age cohort is doing than the age cohort of thirty years before, and how much more income the present cohort has over the bottom quartile of thirty years ago. They believe that a main correlate of lack of upward mobility in the United States, aside from education, whose causal relationship to upward mobility is unclear, is geography. People in Southern cities, regardless of race, have less upward mobility than people in northern cities, rates of upward mobility in some northern cities as high as they are in Denmark, which leads the world.
If that is the case, then the question for policy makes is what Northern cities have that Southern ones don’t, and here all the old suspects are again to be questioned. Not race, but segregation within the community matters. That is an idea made prominent by the sociologist William Julius Wilson a quarter century ago. Convenient mass transportation makes a difference but access to community colleges does not. There seem to be a number of overlapping factors that make Salt Lake City and San Jose have a high rate of upward mobility, while Jacksonville, Florida and Charlotte, North Carolina have low rates-- about half that of the top ten. Mormonism is just a summary of what makes Salt Lake City a place that creates and fulfills go-getters, just as “Silicon Valley” is a summary indicator for what makes San Jose a place to move up. I happen to think that the legacy of slavery and the Confederacy still haunts the Deep South.
This point of view also has a proud pedigree. It reaches back to the studies of upward mobility that were so important in sociology from the Forties through the Seventies. Studies by Blau and Duncan, by Anderson, and by others, said that upward mobility was no higher than it was in Europe, despite the American claim to be the land of opportunity, that misapprehension perhaps the result of confusing spectacular upward mobility with general upward mobility. Maybe the United States was the place where people went from rags to riches more often than elsewhere even if people went from rags to respectability no more readily here than elsewhere. Moreover, the ability to rise up proved harder and harder the lower down you began. People could rise more easily from the middle class to the higher class than from the poverty class to the working class. You could make it to being a factory foreman if you started as an apprentice on the factory floor, but the children of farmers didn’t make it into the white collar class (back then--now they have no other place to go) and the people who made it into the executive suite were people whose parents had been middle management.
It might seem that the two positions are not contradictory. Maybe all the classes are being pressed down by inequality but people have mobility within that overall structure. The N study, after all, measures ranking not life style. Moreover, inequality one refers to a mechanism whereby power over the economy is exercised and the other refers to social structures that abide that are created and exacerbated by that economy. All societies have educational systems that more or less succeed at moving people along to their destinations whether or not those are higher in rank than those of their parents. That does not affect those who are what was once termed “The Power Elite” of the society, which now means financial services people rather than heads of manufacturing corporations.
But the two positions are indeed contradictory. Poor education is the result not only of depleted resources for schools but of people who lead depleted lives that they pass on to their children because there is no point, as far as the elite is concerned, in giving employment to the not very well skilled who nonetheless need it if they are to create stable homes in which children can prosper. Better education for all, perhaps through the mechanism of recruiting people who will eventually go into financial services to work a few years as ghetto school teachers, would allow their students to get jobs that improve the economy as a whole, even if it didn’t raise the net worth of the temporary teachers or the financial industry. The two positions are also contradictory because they refer to different facets of society: to the economic side, which has to do with the creation and manipulation of money, and with the sociological side, which has to do with the intersection of all of those statuses-- fourth grade student, elementary school principal, drug dealer, policeman, and so on, all the way up to thirty year old financial wizard-- which create the great mosaic of social life.
The President can decide in his State of the Union Address to invoke the issue without explaining it very well or fudging the debate so it seems as if inequality and opportunity are the same issue, the two words antonyms. He might say that we need universal pre-K, which is the currently offered panacea for the nation’s education problems, so that poor kids can become rich and help the United States to compete with China, when what he really means is that some poor kids may get enough training so that they can become computer repair people. And the most recent batch of people who will help us compete with China are our own home grown children of Chinese immigrants. But it doesn’t matter if Obama speaks truth to the nation. The debate will go on anyway, it having enough intellectual steam on its own, and how that policy debate unfolds will have much to do with what policy proposals make it through Congress. Are we going to reshape the banking industry-- which wouldn’t be a bad idea, but you don’t want to push the nation into a Depression that comes about because the bankers decide to bring the house down around themselves. Or are we going to provide significant funding and shaping for programs to provide jobs and livable wages for the lower levels of the income ladder, which now stretch up to include what used to be considered middle rank management? It isn’t often that an intellectual debate matters, given the occupationally sustained ignorance of legislators about everything but who is coming to a fundraiser. But this debate does matter and the President is just the sort of professorial soul who can provide it with a clear exposition if he should decide to do so.