The economic crisis in the United States has had a profound impact on
the lives of millions of its citizens. Among the most damaging is the
experience of unemployment. In a country where notions of work,
self-reliance, and self-improvement are fundamental to its identity, the
insecurities and hardships associated with forced idleness are hard
indeed to cope with.
The persistence of large-scale unemployment
is a standing affront to another of America’s core ideas: that, as the
country’s founding document says, all men are created equal. True, the
signatories of the Declaration
of Independence were here pledging fidelity to a natural-rights
principle than thinking of absolute or even relative economic equality.
Still, an important element in the American public philosophy has
always been the idea that the United States does offer, certainly has
offered, greater economic equality, and in particular greater and more
equal economic opportunity. This was the American
dream.
Now, that proposition has become dubious. Many
Americans question whether life will be as good for their children as it
was for their parents. There is much statistical evidence to suggest
that the United States is neither exceptionally equal nor exceptional in
its modern record of upward social mobility.
On the basis of
such evidence I myself have written that “by all statistical measures . .
. the United States, in terms of income and wealth, is the most unequal
country in the world. While the average income in the United States is
still almost the highest in the world . . . the gap between wealth and
poverty is higher than anywhere else, and is growing steadily greater”
(see More
Equal Than Others: America from Nixon to the New Century
[Princeton University Press, 2006]).
Another book, by the
American historian Peter Baldwin, has refined and amplified this
argument. He uses a
wealth of statistical research to show that the United States is less
exceptional than either Americans or Europeans think, and that the
differences in many parameters between (for example) Mississippi and
Massachusetts are greater than those between Europe and America; while
the differences between northern and southern Europe are similarly
comparable to those between New England and the deep south. In most
demographic respects, the United States lies not at an extreme of wealth
or an extreme in any cultural variation, but somewhere inside the
distribution of European countries in each particular respect.
A
broken contract
The former United States labor secretary during
the Bill Clinton presidency, Robert
Reich, dissects the historical dimensions of “widening inequality”
in a forensic article:
“In 1928 the richest 1 percent of
Americans received 23.9 percent of the nation’s total income. After
that, the share going to the richest 1 percent steadily declined. New
Deal reforms, followed by World War II, the GI Bill and the Great
Society expanded the circle of prosperity. By the late 1970s the top 1
percent raked in only 8 to 9 percent of America’s total annual income.
But after that, inequality began to widen again, and income
reconcentrated at the top. By 2007 the richest 1 percent were back to
where they were in 1928 — with 23.5 percent of the total”.
What is important here is that Reich
focuses not on the relative equality or inequality of wealth or income
of American as compared with the populations of other countries, but on
how a trend away from inequality, in the direction of relative equality,
has been reversed.
Things in this respect in America are now back where they were before
the last great depression, in the 1930s.
It is a serious charge
with profound political implications (“What we get from widening
inequality is not only a more fragile economy but also an angrier
politics.”) Since the triumph of conservative economic principles and
policies, beginning in the 1980s, Reich is saying, the United States has
thrown away a pearl of great price: the improvement in the condition of
its citizenry that was achieved by all the efforts of the New Deal and the labour movement,
the opportunity afforded by the collapse of its competitors in the
second world war, and the social-democratic policies of the Truman,
Kennedy and Johnson administrations.
Until the financial crisis
of 2008, most Americans, if they noticed the growth of inequality
at all, probably shrugged. Inequality, many believed, was the price
paid for the dynamism of American industry and research, for the
brilliant achievements of American research, and for the supposedly
greater opportunity Americans enjoy of becoming, in the unforgettable
phrase of Peter
Mandelson, “filthy rich”.
The economic events of 2008-10
ought to have swept such complacency away. So far from being
exceptionally dynamic, American industry seems strangely comatose – an
appearance dramatised by the collapse of the American automobile
industry, the bankruptcy of General Motors and Chrysler and the desertification
of Detroit. Only the computer and information-technology industries and
medical and biological research seem competitive by the standards of
China, the rest of east Asia and even the more dynamic countries in
Europe.
The American propensity to compare the country’s
performance favourably with everyone else has reasserted itself,
however, more quickly than the fortunes of General Motors. The troubles
of European economies, highlighted by the judgments of New York ratings-agencies
and exacerbated by New York bond-traders, have offered an enjoyable
opportunity for American Schadenfreude. The fact that the
dollar has recovered some of its parity against the euro has allowed
many to embrace the illusion that the United States’s economic problems
are over.
For the present, the Barack Obama administration’s
focus in economic
policy is on its rather ambitious attempts to reform (or rather to
re-regulate) the financial system. This is necessary, important and –
given the resistance of Wall Street – difficult, even politically
hazardous. To reform
Wall Street, clearly, is a necessary element in a political strategy to
undo the damage that has been done. It is not, however, a sufficient
one.
A lost generation
Paul Volcker, a former chairman
of the Federal Reserve, makes this point in a timely and persuasive
fashion. Volcker is theoretically an adviser to President Obama
but appears from a distance to have been blindsided by the more ancien
régime of the president’s advisers (such as Larry Summers and the
treasury secretary, Timothy
Geithner; the latter a protégé of the arch-deregulator, Alan
Greenspan, who predictably took advantage of the G20 meeting in Canada
to patronise his European colleagues).
Volcker
praises the administration’s proposals for financial reform. But he
insists that the critical policy issues facing the United States “go way
beyond the technicalities of law and regulation of financial
authority”. The time, he says, is growing short for recognising this and
for taking the necessary larger view:
“Restoring our fiscal
position, dealing with Social Security and health care obligations in a
responsible way, sorting out a reasonable approach towards limiting
carbon omissions, and producing domestic energy without unacceptable
environmental risks all take time. We’d better get started. That will
require a greater sense of common purpose and political consensus than
has been evidence in Washington or the country at large.”
He is
right. And to this list of urgent priorities – each of which is either
flatly denied or dangerously minimised by the Republicans – it is surely
time to add another. That is, to reverse the trend identified by Robert
Reich and restore what has always been an integral apart of the motive
force of American society: a conscious political will to restore
equality of opportunity.
The
much trumpeted research successes and highly paid professors at a
couple of dozen private American universities (including a handful of
well-endowed public institutions) conceal the crisis in public higher
education. The most recent figures show that while a higher proportion
than ever before of Americans start university courses (more than 70%), a
lower-than-ever proportion (roughly 30%) graduate.
David
Leonhardt comments: “Over the last few decades, the number of
teenagers who enroll in college has actually been rising fairly
steadily. But graduation rates have fallen. Less than a third of all
students who enroll in community colleges with the intention of getting a
two-year degree – a degree leading to jobs in nursing, auto repair,
preschool education – ever do so at any college, statistics suggest. The
United States still leads the world in getting students to start
college, notes Lawrence Katz, co-author of a recent history of
education. But we no longer lead in what really matters: educational
attainment”.
A
similar process has long been growing in secondary education. For a
time it was argued that the relatively poor performance of American
college students (in all but the best private institution) was due to
the high proportion of immigrants’ children. Again, research suggests it
may have more to do with the poor quality of the average public
secondary school.
The weakness of American education and
especially American scientific education has long been concealed by the
ability to attract gifted scholars and graduate students from China, the
Indian sub-continent and western Europe. That process is getting hard because of the
irrationality of the Patriot Act, which makes it harder for what Rudyard
Kipling (in his American period…)
called “lesser breeds” to get visas to study and work in the United
States.
This is not just a fairness issue. It also directly
affects the prospects of the American economy becoming more
competitive.
A political choice
Americans have been
slow to recognise that their country, long dedicated to the ideal of
equality, is becoming a class society that in many ways resembles the
inequalities of 19th-century European society, without
the political regulating mechanism of class-based socialist and Labour
parties.
Political logic might dictate that as the Republican
Party is increasingly identified with the interests and the attitudes of
the “haves”, the Democratic Party ought to see its future as the
representative of the “have-nots”. Some even supposed that President
Obama might be planning to lead the Democrats in that direction.
It
has not happened. Obama promised a massive reform of the grotesquely
expensive, wasteful and unjust healthcare
system. With great difficulty, he succeeded in persuading Congress to
pass a substantially weathered down, though still well worth having, version of his
original plan.
In other respects, his administration has been
surprisingly conservative. In part, it is now clear, this reflects his
own personal instincts and attitudes. In part, it reflects political
“realities”, in the sense that even modest reforms are greeted by much
of the American media and therefore by a surprisingly large proportion
of the voters as dangerous threats to the American constitution
and way of life. Obama is nothing if not politically cautious, and
while his political skills are impressive
in some respects (for example, his remarkable gifts as an orator), it
is clear that, in is first term, he will not achieve the substantial
reforms won by a Franklin Roosevelt or a Lyndon Johnson.
That is
why the outcome of the mid-term
elections due in November 2010 is so vitally important, and so hard
to predict. 4 July has come and gone. Traditionally, there is a
political and electoral truce from Independence Day until Labor Day at
the beginning of September, leaving two months for the electoral season.
There are signs that that tradition is being ignored this year, partly
because the mid-term prospects are at once so important and so hard to
predict.
If the Democrats survive
the 2010 elections without major losses, it may be that Barack Obama
will move relatively boldly to tackle the problem Paul Volcker has
identified. If the turbulent political waters reinforce the president’s
instinct for caution, his own prospects of winning a second term must be
in doubt.
In a future column, I will try to read the mid-term
runes. Already, it is clear that the United States is fast approaching a
exceptional set of political decisions that will have lasting
consequences for its society.
Godfrey Hodgson was director of the Reuters’ Foundation Programme at
Oxford University, and before that the Observer’s correspondent
in the United States and foreign editor of the Independent. This article has been republished under a Creative Commons licence from OpenDemocracy.net.
