Adam picks up on Felix’s big post on the current employment situation. I don’t have a lot to add to Adam’s commentary but I want to address some of the fundamental issues Felix raises. There are a lot of things here and we are really getting to the heart of what ails America. This is a long conversation and I hope to produce a series of posts on this.
However, in the interest of getting the conversation going I will start with my most controversial opinions.
Middle Class Fetishism
I think quite simply that too many make too big of a deal out of the middle class. Chrystia Freeland paraphrases and quotes Arianna Huffington as saying
But, as Huffington pointed out, the political consequences of a two-speed America might not be pretty: “America cannot be America without a middle class … we will become Brazil and all live behind gates to protect our children.”
Well yes, the consequences might not be pretty. However, I don’t think they need to be un-pretty. Contrary to many on the both the left and the right I don’t think that most Americans care that much about the rich, either demonizing them or becoming them. They mainly enjoy gawking at them.
The average American might dream of being a Hollywood Star or Sports Legend. Primarily for the fame but also in part for the riches. They might also be jealous of the lifestyles of such superstars. However, its an ephemeral jealousy and a distant dream. They basically see this as another world. Fodder for reality shows and the like.
The same is largely true of high income professionals like Surgeons, Software Architects, Fashion Designers, Celebrity Chefs, etc. The reason its not true of CEOs, Hedge Fund Mangers and Oil Executives is not because of the income gap. Its because the average American perceives these people as having done something to make their lives worse. And, in many cases the average American is right about that.
The point then, is that to quell the anger of the people, to prevent the unlovely situation of Brazil, we don’t need to minimize the income gap between the rich and the poor. We need to make sure that the rich aren’t running roughshod over the poor.
Ultimately I think that’s a question that’s much better dealt with by reforming administration of the law than fighting the gigantic tide of globalism. In part what it means is a class of regulators and public defenders that is cut from the same economic and educational cloth as those that protect the wealthy.
If bank executives are paid 500K a year but bank regulators are paid 100K a year then its pretty clear which direction the bright young finance majors are going to gravitate towards. That type of pay disparity matters because you are attracting competing talent in adversarial role. When one side as that much of pay advantage regulatory capture is inevitable.
If public defenders are paid 40K a year while private defenders make 250K a year, then its understandable that the average citizen is going to feel that the law doesn’t apply to the rich.
However, this doesn’t mean that we have to duct tape the entire economy in such a way that the average high school graduate is making a salary that is X percent of what bank executive makes. So long as the average high school graduate can live his life without fear that he is being expressly screwed over by the bank executive or that the bank executive can literally get away with murder, I think he will feel alright.
Moreover, what is important to a lot people in their daily lives is that they are able to feel productive, that they have some job. This is why I am highly adverse to policies that might raise the average wage at the expense of shrinking the ranks of the employed. A society where virtually everyone has some job even if the average wage is low is going to be happier than a society in which people regularly fear being left with no job.
If we wind up with a two tier society that is fine, so long as the institutions of that society dutifully protect the rights of those in the bottom tier. This is not a trivial problem, no. But, I think its solvable and I certainly think its easier than trying to stop the basic forces of technological change and globalization.
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Friday ~ July 9th, 2010 at 2:02 pm
Apex
This seems really well thought out to me.
While I think there is always some relative comparison based sense of equitable distribution that goes on I think the basic claims here are right.
In fact if the rich were so separated from the rest as to be isolated from them the rest of the population would not feel much need to compare themselves to them and would have little animosity towards them as long as they don’t believe they are exploiting them.
One problem a diverse middle class does have is it many instances where your neighbor is twice or three times better off than you or maybe not your direct neighbor but the neighborhood right down the street which you drive by every day. This makes relative comparison almost unavoidable and the sense of not getting your fair share becomes almost inevitable in some cases.
But as I said I think your general argument makes a lot of sense to me. The biggest anger is from those who people think are exploiting people or resources at the expense of others.
Friday ~ July 9th, 2010 at 8:37 pm
Rebecca Burlingame
This is a good place to start. There are certain “rule sets” that locales can make. Such as, what can individuals and families reasonably be able to live in that they can build or otherwise afford? Sure it’s fine to live in McMansions when possible but much of the real world would settle for 1,000 square feet or less in the meantime. Who really zones for that in the U.S.? Also, being able to get from point A to point B. One only wonders how many motivated youth are thinking of leaving the U.S. for the simple fact that they’d rather live life without having to own a car. Is anyone out there planning affordable housing developments, who is thinking about that? Once we have living and transportation systems we can afford, the rest might start to look a bit more doable.
Friday ~ July 9th, 2010 at 11:44 pm
teageegeepea
I gave vent to my fears of a two-tiered society here.
“We need to make sure that the rich aren’t running roughshod over the poor. ”
You might be interested in Glaeser & Schleifer’s The Injustice of Inequality. I can’t say that I agree with it, but it’s the sort of argument libertarians need to grapple with.
Friday ~ July 9th, 2010 at 11:47 pm
teageegeepea
Also, I applaud you for coming up with “middle class fetishism”. And if you didn’t come up with it, for popularizing the term. Politicians and media figures drone on and on about the middle class because that’s what most voters & consumers identify as. Back in the day when being white was more salient, they pounded that instead.
Saturday ~ July 10th, 2010 at 8:57 am
Philip Brewer
I think you’ve missed the actual dividing line between the middle class and the poor.
You’re right about the high school graduates who actually make it into the middle class, even at the lowest rungs: The ones who get adequate jobs and can afford small house (or at least a decent apartment) and support a family. But those are exactly the ones who seem endangered.
What if vast numbers of the people whose parents were in that category find it closed to them? What if those children of the middle class find that they can’t get jobs, or can only get jobs so poorly paid that they can’t live on their own (let alone support a family)?
We’ve already got a stereotype of the “gen y” folks who, having grown up affluent, are choosing to live at home rather than have to get by on what they can earn working as baristas. They don’t seem a threat, so far. But what about the people who grew up a rung or two down on the ladder? They, I think, might well get angry when the best jobs they can find don’t come close to supporting them.
Sunday ~ July 11th, 2010 at 11:26 am
jazzbumpa
Contrary to many on the both the left and the right I don’t think that most Americans care that much about the rich, either demonizing them or becoming them. They mainly enjoy gawking at them.
True, but irrelevant. You are positing the existence of a two-tiered situation where there is great disparity between rich and poor, but still equal justice (which implicitly further suggests equal opportunity) for all.
I’m pretty sure the world doesn’t not work that way. I can cite many historical examples of two tiered societies when exploitation was the norm, from ancient Egypt to the entire middle ages of Europe, to present time Banana republics. In fact, the middle class sprouted and grew over centuries in the interstices of feudalism (I’m paraphrasing Barbara Tuchman.) I really hope we don’t have to do all that again.
Capitalism needs consumers to flourish. The poor have little excess to use on consumption, and the rich are to few to consume enough, so they just keep getting richer (as suggested in Matthew 25:14-30.) If you like capitalism, you should fear the 2-tier society.
As U.S. society has become increasingly two-tiered since about 1980, GDP growth has declined, the money multiplier has dwindled, and now disappeared, and poverty has increased. These are characteristics of society that is either sick or in decline. We now even have privately owned prisons, with a lobbying team pushing for ever more severe punishment for trivial crimes, and a larger prison population per capita than repressive police states. It’s not just economic – it’s societal.
Remember the golden rule – who has the gold makes the rules.
if we wind up with a two tier society that is fine, so long as the institutions of that society dutifully protect the rights of those in the bottom tier.
In that society, everyone will have a pet unicorn.
So this might be well thought out, but if so, it is a well thought out fiction.
Cheers!
JzB
Sunday ~ July 11th, 2010 at 11:39 am
jazzbumpa
Jack, commenting here in a totally different context says something highly relevant.
http://econospeak.blogspot.com/2010/07/noh-explanation.html
Try the explanation given by my own favorite political analyst, Maximillian Robespierre. In an obscure quote, I found it in Schurr’s Fatal Purity, R. asks and answers his own rhetorical questions. “When will the people be educated? When they have enough bread to eat and when the rich and the government stop bribing treacherous pens and tongues to deceive them…” “When will this be? Never.”
Without an independent Fourth Estate it sems unlikely, to me, that democracy can be viable. The MSM, as it is so innocuously called, is tightly controlled by a few corporations that are then controlled by a few very wealthy groups. In addition we have that modern form of propagandist so erroneously labeled the think tank.
Lots of thinking goes on behind those walls, but little of that is based upon demonstrable facts and it is wholely an industry whose purpose is the dissemination of ideological screed.
You see, the bottom tier ends up with power and voice in proportion to their wealth.
lo siento,
JzB