“The Industrial Revolution translated what had been stagnant economies for hundreds of years into newfound sources of permanently increasing living standards”, Richard Curtin, director of the University of Michigan consumer sentiment survey wrote, in a piece published on July 10.
“Growth and efficiency have dominated the allocation of economic benefits ever since–as long as the concentration of income and wealth was not too excessive”, he went on to say.
The “as long as” bit is an important caveat.
A persistent theme in these pages over the past year has been the extent to which American-style capitalism has reached a tipping point beyond which large swaths of the voting public are no longer prepared to accept the perpetuation of wealth inequality.
Generally speaking, Americans harbor a deeply ingrained allegiance to capitalism and an equally entrenched aversion to socialism. The latter is usually presented as a straw man (e.g., references to Venezuela), making the former preferable even in its most extreme forms. The tragic irony is that capitalism run amok (the unconstrained “free market”, as it were) has not served the vast majority of Americans well.
True, the system affords the American consumer luxuries that would seem absurd in poor countries. For example, I counted 21 separate flavors of coffee creamer the last time I was at a large, chain grocery store — 29 if you included sugar-free variants of some flavors. Even the largest bottle was less than $3.50, and if you were willing to buy the store brand, the jug-size french vanilla was only $2.79.
And yet, things like healthcare and higher education aren’t just expensive, they are prohibitively costly for many Americans living on wages and salaries below the national median. For those who don’t own a home, rent costs are astronomical in some locales.
The plight of the “average” American worker has steadily declined for decades. Real wages are stagnate for many in the middle-class, unions have seen their influence eroded, and labor’s bargaining power seems to diminish by the year.
America’s services-based economy is a construct that caters to convenience, but at a cost. There’s a Starbucks on every corner, and you’d almost have to try to get yourself lost in order to be more than a five-minute drive from a pack of french fries. That, in turn, means that in “good” times, it’s not terribly difficult to find a job making lattes or frying potatoes.
But good luck finding steady employment that pays you $75,000/year plus benefits to produce something durable, or to produce an input into something durable that someone else making $75,000/year plus benefits will eventually make.
This isn’t a populist lament for the golden era of blue-collar America. As regular readers are acutely aware, I harbor no nostalgia for a bygone era when every able-bodied American male could find gainful employment in dangerous factories. The point, rather, is that it’s not just the disappearance of manufacturing jobs. Increasingly, there is no “sure” path to stable employment in the world’s largest economy. Liberal arts degrees are totally useless unless one plans to get a PhD. MBAs are a dime a dozen and won’t get you to Wall Street unless yours if from one of a handful of schools that “counts”. Law is still a decent profession, and real estate may work as long as the economy is doing ok, but that kind of begs the question.
With this as the backdrop, Americans are turning to the so-called “gig economy” which, let’s face it, is a euphemism for untold millions of unemployed freelancers who may or may not possess a readily identifiable skillset.
Last year, I read an article (published in the paper of record, if I recall correctly) that attempted to identify gig workers with what the author described as the “hustle” mentality. The reference (although it wasn’t clear the author understood this), was to a subgenre of southern hip hop. Without delving into the specifics, the article was one, long false equivalence. There is no parallel one can draw between the average gig economy worker and the heroes of Atlanta’s “hustle” rap scene (also called “trap music”). In fact, the vast majority of gig economy workers are the living embodiment of what, in the parlance of that particular hip hop subgenre, is called “hustling backwards” — taking risks or otherwise overexerting oneself only to end up in the same (or worse) circumstances.
That captures the plight of too many Americans — overexerting themselves, day in and day out, just to keep the lights on. Working two (or three) jobs just to pay the mortgage (or the rent) on a humble abode which serves as little more than a break room in which to nap between punching clocks. Always hustling backwards. Certainly never getting ahead.
Technology numbs the pain — a glowing, digital analgesic. Netflix is there. (Assuming we have time to indulge between shifts.) The callousness of Facebook purporting to be a “social network” seems lost on everyone. (It’s a website. There’s nothing “social” about it.) Twitter is now the nightly news, only instead of shouting at the television, we can shout at each other. (In some cases, the newsmen and women will shout back, as will the people who are the subjects of the news.) And Google operates in the background as an indispensable utility. (Just as one tends to instinctively flip the light switch when the electricity is off, you could easily imagine trying to ask Google why your WiFi connection isn’t working.)
This is what life has been reduced to for millions of Americans in what is supposed to be a thriving democracy built on a vibrant economy. Or is it a vibrant economy built on a thriving democracy? No matter, really. Because it’s neither anymore. And that’s the problem.
The solution isn’t the abolition of capitalism, nor is it some one-time, draconian redistribution of wealth to “even the playing field”. (Without structural change, the field will become uneven again in short order.) Rather, the solution is an honest, frank discussion around distributional issues.
“Although the attitude towards all kinds of inequality like racial and gender exclusions has been revised in the past, the same cannot be said for wealth inequality”, Deutsche Bank’s Aleksandar Kocic wrote last year, in a piece arguing that absent a rethink of the mode of stimulus (how it’s delivered), the yield curve may remain in what he called a “flattening vortex“.
“The resistance against redistribution of wealth has been remarkably robust and resilient across a variety of political systems, from dictatorships, monarchies, peasant societies, to post-industrial formations and democracies”, Kocic went on to write, adding that “the wealth protection instinct has proven to be one of the strongest sociopolitical forces in human history”.
In 2020, the pandemic has engendered one of the strongest countermovements in recent memory, thanks to the sudden realization that different manifestations of inequality tend to perpetuate one another. (We’re not so different after all, everyone below 1% seemed to realize.)
On the other side, wealth and privilege admit of a similar self-feeding dynamic.
“Growing income and wealth inequalities have meant that judgements need to move toward the moral arena of fairness and equity and away from the pure economic criteria of growth and efficiency”, The University of Michigan’s Curtin wrote, in same piece mentioned here at the outset. “Whoever is elected president, these distributional issues will remain central to how best to maximize the potential of the economy”.
If the country doesn’t have this discussion soon, some manner of revolt seems likely.
As it stands, America is becoming a modern Belle Époque. For those unfamiliar, you can Google the term. Assuming your WiFi is working, that is.
Brilliant, H!
It’s summer, so I try to prioritize quality for two reasons: 1) People want to be outside, cooking out, etc., so I want to make every minute they spend here on the site more than worth their time, 2) pure market posts can be tedious during the summer lull, and I don’t want readers to think I’m conjuring content for the sake of content. So, I try to pivot to meaningful economic posts with an emphasis on good writing during the summer so people always come away glad they visited the site.
This is one of the most important posts I have read in quite some time. There are no easy answers to these rather structural problems. My father supported a family of five on $30k a year in the early 80’s. I was gifted with a strong work ethic and common sense. But there was also a significant amount of luck along the way. The system needs to change. Capitalism doesn’t work for everyone and free markets no longer exist. And while the job market in the early 90’s was no picnic, I can’t imagine what it is going to be like in the years ahead. All I know is I was fortunate to have relatively easy, cheap access to college in the late 80’s/early 90’s. That relatively cheap degree from a mediocre university resulted in a significant amount of opportunity. That type of opportunity is afforded to fewer kids today, resulting in even more uneven distribution of opportunity and wealth generation. God speed!
Wow, been reading your stuff for awhile but this one really stands out as excellent; very literary and I’d say good on deliberately avoiding numbers.
Economics, Philosophy, History, and Politics all intertwined into a frank and fair assessment of Populism and Pandemic in 2020.
Thank you for summing it up so well: we need to start having hard conversations.
^^^Agree 100%^^^
I wasn’t sure if you were deliberately avoiding listing Software, Robots/Automation, and Renewable Energy as places for “path to stable employment”?
https://www.bloomberg.com/news/features/2015-11-17/latest-craze-for-chinese-parents-preschool-coding-classes
Nice to see someone add some complexity to the obvious….. and then ,…. add some obvious to the complexity..
There’s a difference between equality of opportunity and equality of condition. The U.S. still offers many opportunities. My wife is a Cambodian refugee, and her siblings do very well running multiple donut shops. They get up very early and work long hours, but they do well. Because they work very hard for their money, they tend to be quite conservative regarding taxes (having fled a dystopian communist regime also contributes to their conservatism). Donuts aside, here in southern CA there are usually many openings in education and law enforcement, just to name 2 career fields with opportunities. Not saying everyone can do these professions well, but there are jobs to be had. The main grower of wealth inequality has not been the lack of opportunities – it has been the asset inflation perpetuated by Federal Reserve policies. That inflation has led to skyrocketing prices in stocks and real estate, while most incomes have been fairly stagnant. The end result: it’s much harder for people in lower income brackets to make a living (buy a home or even make rent) than it was before monetary easing began under Greenspan, and many in the upper brackets have amassed fortunes from stock appreciation, especially over the past 10 years.
We are nowhere near equality of opportunity. Starting in the womb, the children of the working class are already at a disadvantage. Their parents can’t go to all the checkups because they can’t miss work or they can’t afford the cost of the insurance or take the time to understand the requirements. Early detection of issues gets missed. They have less access to nutritious food. That, among other issues, all impacts development in utero.
Once born, it’s worse. Working class parents can’t afford childcare because we don’t offer paid leave or universal childcare. Their kids get way more screen time and way less attention. Also, the nutrition issues continue to plague them as their stuck with garbage food because that’s what’s cheap and easy. Again, brain development suffers.
Once they start school, they go to underfunded and segregated school districts. They are among peers who disrupt classrooms and teachers who are always short on the time and resources to deal with the learning issues that started well before the kids started going to school. They continue to fall farther and farther behind.
College is out of reach because it’s way too expensive and they don’t even know what resources are out there or how to take advantage of them because they don’t have parents who have been there before.
Those are just a few of the numerous issues that don’t get us anywhere near equality of opportunity. If you think teachers are earning a decent living in this country, you haven’t been paying attention. States have dramatically cut back on the pay and benefits that teachers receive.
Great for your wife’s family, but anecdotal evidence doesn’t make for good policy. Yes, the fed has exacerbated the issue, but as long as the government sits on its hands, the working class is stuck in a “heads, the rich win, tails, the working class loses” situation and the Fed has just chosen the heads scenario because the alternative is worse.
This post mixes misinformation with deflection. How are doughnut shops, along with police and teacher job openings a solution to systemic precarity and social instability?
Fed policies have contributed to asset bubbles and economic inequality, but those policies were, and are, not formulated in a vacuum. Blaming the Federal Reserve for the growth of inequality is missing the forest for the trees.
The United States finds itself facing several significant challenges because over the last 40 years Republicans have largely hijacked the national dialogue with their talking points on the evils of government and the public sector along with the necessity for ever more tax cuts.
It is not by accident that the United States is the only developed country without universal healthcare and with seriously degraded public infrastructure and social safetynet.
Draghi for president.
Gig economy would work with Universal Healthcare and minimum income guaranteed. Yes, if we look at it old school, and someone has to pay for it, the wealthy will. And guess what, they will still be wealthy.
I have been having that End of Empire feeling since Iraq. Afghanistan was a no brainer as long as you knew it’s history, but making it second fiddle was a head scratcher.
Empire ambitions are being played out by several actors. Maintaining a peaceful world lacks priority.
There is no remedy except legislative….which will fail, .in Rome they had the games, the decadence, in America the ‘games’ (distractions) have been postponed, the decadence seems to be worsening……when the ‘have-nots’ decide the ‘haves’ possess too much……
The unequal distribution of wealth – when it’s not too great, adjustments can be made to maintain relative stability. However, there is a point when the suffering masses demand complete change that begins with death and destruction. Have humans actually evolved to a point where this can be avoided? It doesn’t seem likely if a significant percentage judge each other by skin color or won’t wear a mask in public for the greater good.
Watched my favorite movie that is set in the time of belle epoque last night – Gigi.
LOL, another movie that I love that could not get made today.