Public Signals

I’m excerpting liberally below, but you should still consider reading the original. This is a conversation that goes beyond the conventional and superficial. It’s not fun and it’s not optimistic, but if you believe that the first step required in dealing with challenges is to learn and think realistically about them, then this is worth reading.

David Rothkopf of Foreign Policy interviews Ed Luce and write it up in A Nation of Spoiled Brats. Luce has recently finished the book, Time to Start Thinking: America in the Age of Descent.

On economics and inequality:

FP: How is this decline different from all other declines? What are the warning signs that this is not your father’s recession?

EL: Let’s pick up the current unemployment numbers and start with those, because we have a few months of welcome decline in unemployment — 200,000 people or so per month. This has been accompanied by declining incomes for the median wage earner. So incomes are lower each year into the recovery than they were in the previous year, the reverse of what you would expect in your grandfather’s or your father’s recovery, but very much what you would expect if you look at the previous recovery in 2002, just a more pronounced version of it.

So if you look at 2002 to 2007 and you observe the structural forces at play in that business expansion — mainly that the middle class income dropped, that very, very few jobs were created and that the higher value-added jobs tended for the most part to be replaced by lower paying ones — those trends became pronounced in the 2009 recovery onwards. That suggests that this is a deep structural problem with the way globalization and technology is impacting the majority of the American workforce. I’m agnostic as to whether this reduces America’s overall growth rate. The gains of growth are so deeply skewed to the very highest earners. But there is a lot of evidence in studies of other economies that when you have gross, Latin American-style inequality, growth and competitiveness tend to get adversely hit.

FP: What evidence is there that inequality in the U.S. has gotten worse?

EL: There’s a lot of evidence, and there’s a shrinking school of people denying this evidence. The most powerful piece is also the most recent, and that is the distribution of growth since 2009. The paper by Saez and Piketty from Berkeley University that came out in early March is particularly instructive. It shows not only that 93 percent of the gains in the 3 percent growth America got that year went to the top 1 percent, but also that the top 0.01 percent, namely the top 15,600 families, took 37 percent of the growth. That’s the top one in 10,000 people. Even in 2002-2007 inequality was getting much worse. But in this recovery it is an order of magnitude worse.

FP: Hasn’t social mobility also declined?

EL: It’s a triple cocktail. As America’s inequality is growing to Latin American levels, social mobility has fallen to sub-European levels. And of course, median wage stagnation and the whole skills globalization problem is deeply entrenched. Far more important than whatever this month’s consumer sentiment number is or last month’s was — these are the numbers we should be looking at.

On politics:

FP: So in the U.S., what has the political situation gotten us?

EL: People tend to make a fetish out of Washington and blame Washington on itself, as if somehow it is just in suspension from the society that elected it. But some of the reasons for my skepticism about how easy it will be for America to rejuvenate itself stem from that fact that polarization in Washington is deeply rooted in trends beyond the Beltway, in the real America. This is the case with the gradual hollowing out of the middle class and the decline in income or benefits and all the social problems that come with that.

The American system is designed to work best when there’s cooperation between factions and parties and when there’s some degree of working together. It’s no surprise, therefore, that when you get the wrong kind of parliamentary politics, namely discipline and ideological divisions, cooperation becomes impossible, gridlock becomes the norm, and it becomes almost inconceivable to imagine the kinds of reforms that in a parliamentary system a majority government can very easily push through.

And here’s an exchange that explains why those of us discouraged with and cynical about American politics must not abandon the field. Quite the contrary.

FP: Among the things that makes your book great is that you went out and you reported on America. You saw people, spoke to them — followed in Tocqueville’s footsteps, as some have suggested. Something’s broken; you don’t want to blame it all on Washington. What’s wrong with the American people?

EL: That’s a very good question. And I attempt to answer that in different ways, partly though politics. Americans don’t participate in politics, or those who don’t particularly want to do the rest don’t seem to give a damn. And there’s a kind of self-fulfillingness to that. And they do give a damn, and I can understand why they’re alienated. But their very alienation reinforces what it is that alienates them. (Emphasis added.)

Difficult challenges are often (usually? always?) difficult because there are multiple, intersecting, interacting, and self-reinforcing components to them. Understanding the interrelationships and interactions are essential to dealing with them realistically. From the sounds of it, that’s very much what Luce is attempting to do.

Tagged as: Economic Conditions, Economics, Inequality, International, Politics, United States

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