Connect The Dots!

It’s not just easy access to guns–although that access certainly facilitates rising American homicide rates.

As the Guardian recently reports, there is a strong–if surprising– connection between income inequality, respect, and increases in violence.

A 17-year-old boy shoots a 15-year-old stranger to death, apparently believing that the victim had given him a dirty look. A Chicago man stabs his stepfather in a fight over whether his entry into his parents’ house without knocking was disrespectful. A San Francisco UPS employee guns down three of his co-workers, then turns his weapon on himself, seemingly as a response to minor slights.

These killings may seem unrelated – but they are only a few recent examples of the kind of crime that demonstrates a surprising link between homicide and inequality.

The article cites emerging research that strongly suggests that inequality plays a pivotal role in escalating passions in encounters that might otherwise end with some profanity and fisticuffs–that it raises the stakes of fights for status among men.

The connection is so strong that, according to the World Bank, a simple measure of inequality predicts about half of the variance in murder rates between American states and between countries around the world. When inequality is high and strips large numbers of men of the usual markers of status – like a good job and the ability to support a family – matters of respect and disrespect loom disproportionately.

Inequality predicts homicide rates “better than any other variable”, says Martin Daly, professor emeritus of psychology and neuroscience at McMaster University in Ontario and author of Killing the Competition: Economic Inequality and Homicide.

Other studies show that rates of gun ownership rise when inequality does. Rising inequality also predicts the re-emergence of cultural traits like placing more emphasis on “honor.”

“About 60 [academic] papers show that a very common result of greater inequality is more violence, usually measured by homicide rates,” says Richard Wilkinson, author of The Spirit Level and co-founder of the Equality Trust.

Why would financial inequality lead to a renewed emphasis on status and respect? Researchers explain:

When someone bumps into someone on the dance floor, looks too long at someone else’s girlfriend or makes an insulting remark, it doesn’t threaten the self-respect of people who have other types of status the way it can when you feel this is your only source of value.

“If your social reputation in that milieu is all you’ve got, you’ve got to defend it,” says Daly. “Inequality makes these confrontations more fraught because there’s much more at stake when there are winners and losers and you can see that you are on track to be one of the losers.”

Social science is methodically enumerating the negative social consequences of extreme inequality. Most reasonably well-educated people recognize that inequality produces social instability–history teaches us that growing anger from those with nothing to lose leads to riots, even revolutions–but most of us are less familiar with other ancillary effects.

There is ample evidence that large gaps between the rich and poor retard economic growth, depress marriage rates, and raise crime and homicide rates. (Ignoring the 41 million Americans who live in abject poverty in order to gift your already obscenely wealthy donors with a tax cut also implicates that pesky little thing called morality.) Historical precedent suggests that these effects–left unaddressed– ultimately destroy societies.

None of that evidence, evidently, is persuasive to the Paul Ryans and Mitch McConnells of this world. Or perhaps they know and just don’t care. They are perfect examples of what Hannah Arendt called “the banality of evil.”

Comments

Rawls And Masson Are Right

Doug Masson can always be counted upon for thoughtful observations about policy proposals, whether those are at the state or federal level. In a recent post,  he took a look at the GOP’s tax bill, and made a point that is often missed–or misunderstood.

After criticizing Orrin Hatch’s nonsensical justification for a provision that would widen the gap between the rich and poor, Masson writes

I always get grief from my conservative friends when I say stuff like this, but reducing wealth disparities in the country isn’t just a matter of bleeding-heart, feel-good liberal mumbo jumbo like fairness and equality. Concentration of large amounts of wealth in a few hands distorts markets and democratic processes. The system can tolerate — even thrives under — certain amounts of inequality. It creates incentives that fuel the economy. But, beyond a certain point, things start to break down.

The most common defense of Masson’s position–a defense that is entirely accurate, albeit incomplete–is historical. Most countries that have experienced persistent large-scale inequalities have eventually been destabilized by revolt or revolution. This country is already seeing signs of citizen unrest; continued Congressional theft from the poor in order to bestow even more goodies on the rich will be met with anger and resistance, and it won’t be pretty.

Economists also support Masson’s thesis. They point out (as I’ve done several times on this site) that 70% of American economic activity is dependent upon consumption, and when large numbers of Americans have little or no disposable income with which to consume–when they are barely able to afford necessities–the economy can’t grow. When demand is weak, employers don’t increase production–which means they don’t create new jobs.

Those practical arguments are persuasive, but we shouldn’t ignore the fairness argument, because it goes to the heart of what makes a just society.

John Rawls was the pre-eminent political philosopher of the 20th Century, and his book Justice as Fairness established a framework within which political philosophers still argue. Rawls believed that all social primary goods–by which he meant liberty and opportunity, income and wealth, and what he termed “the bases of self-respect”–should be distributed equally, unless an unequal distribution of any or all of these is to the advantage of the least favored. 

Inequality, in other words, can be justified, but only if that inequality is necessary to the improvement of the lives of the least fortunate.

When Masson writes “The system can tolerate — even thrives under — certain amounts of inequality. It creates incentives that fuel the economy. But, beyond a certain point, things start to break down,” I read that as another way of making Rawls’ point.

When markets work–when we have genuine capitalism, not the corporatism that characterizes the United States today–they usually meet Rawls’ criteria. Invent that better mousetrap, and everyone’s mouse-catching is improved. The money earned by the inventor provides an incentive to other ambitious folks, prompting them to invent something else that will improve life for many people, including  poor people. A rising tide really does lift all the boats–we just have to be careful to define what constitutes a “rising tide.”

The fact that our mousetrap inventor has more money than someone else is thus a permissible inequality, because he has earned it in a way that improves–in some way, to some extent– the lives of the less fortunate.

This definition of justifiable inequality doesn’t reflect the inequities in today’s America. As Masson points out, money acquired isn’t necessarily the same thing as money earned; there’s a difference between that inventor/entrepreneur and those whose wealth was inherited or acquired as a reward for  “gaming the system” or helping others to do so. Bigly.

Our gilded age inequality fails all three tests: history, economics and fairness.

We need to fix it.

Comments

Listen To Nick Hanauer

Recently, I posted about the difference between tax cuts and tax reform, and why we need the latter but not the former. That argument was made–far more persuasively than I made it–by billionaire Nick Hanauer, in a recent post to Politico.

The Republican tax plan is a scam—a massive and destructive financial giveaway masquerading as pro-growth tax reform. Which is why our first response must be to demand not one penny of tax cuts for big corporations and rich guys like me. In fact, if I were Benevolent Dictator, I would substantially raise taxes on myself and my wealthy friends. Why? It is the only way to sustainably grow the economy, boost productivity, increase business opportunities, and create more and better jobs.

Hanauer takes aim at the central premise of GOP tax policy, what I have referred to as an “article of faith,” because when you take something on faith, it’s because you have no empirical evidence for its validity. In this case, as Hanauer points out, we have substantial evidence that the premise is fatally flawed.

There is is simply no empirical evidence nor plausible economic mechanism to support the claim that cutting top tax rates spurs economic growth. When President Bill Clinton hiked taxes, the economy boomed. When President George W. Bush slashed taxes, the economy ultimately collapsed. It wasn’t until after most of the Bush tax cuts expired during the Obama administration that the post-Great Recession recovery started to pick up steam—an ongoing recovery that, as uneven as it has been, has grown into one of the longest economic expansions in U.S. history.

And then, of course, there’s Kansas.

As we all know, and as Hanauer reminds us, Kansas dramatically “underperformed ” the rest of the country in economic growth and job creation after Sam Brownback, its “true believer” Governor, slashed taxes on individuals and corporations. And as he also reminds us, California, which horrified those true believers when it imposed the nation’s top income tax rate, has thrived.  By 2015, California had the fastest-growing economy in the nation. Kansas? Dead last.

For several years, Hanauer has been arguing that Republicans have the economic argument exactly backwards–that inequality, not high tax rates, retards economic growth and job creation.

But the Republicans’ problem is that they have economic cause and effect reversed: Low wages and rising inequality are not symptoms of slow growth, low wages and rising inequality are the disease that causes slow growth—and inequality cannot be cured by creating even more inequality. In reality, our modern technological economy is best understood as an evolutionary feedback loop between innovation and demand. Innovation is the process through which we evolve new solutions to human problems, while consumer demand is the mechanism through which the market selects and propagates successful innovations. And it is economic inclusion—the full participation of as many people as possible in as many ways as possible, as innovators, entrepreneurs, workers and robust consumers—that drives both innovation and demand. The more we invest in the American people—in our wages, our education, our health care and our infrastructure—the more dynamic that feedback loop, and thus the faster and more prosperous our economy grows.

As I tell my students, if you own a widget factory, and no one is buying your widgets, you are unlikely to hire more workers to increase widget production. When consumers lack disposable income with which to buy your widgets, you cut back–or stop making widgets entirely.

As Hanauer explains:

The real problem with our economy is that we are concentrating wealth in the hands of people who aren’t spending or investing it, while starving working- and middle-class Americans of the ability to invest in themselves—not to mention sapping the consumer spending power that accounts for 70 percent of GDP. We rich Americans may not all be idle, but these days, much of our money is—and you will not get it flowing back through the economy again by cutting our taxes even further. I already earn about 1,000 times more per hour than the average American, but I couldn’t possibly buy 1,000 times more stuff. I only own so many pairs of pants. My family and I can only eat three meals a day. We enjoy a luxurious lifestyle, but we already own several houses, a private jet and one too many yachts (turns out, the optimal number is two). Cutting our taxes will make us richer, but it won’t incentivize me or my venture capital partners to spend or invest more than we already do. What’s holding us back isn’t a shortage of cash, but rather a shortage of demand—from you.

Exactly.

Thank you to everyone who wished me a happy birthday yesterday. It was much appreciated!

Comments

Which America Do You Live In?

My father was called up for service in World War II when I was a toddler, and when the war ended, I was still far too young to comprehend what “war” really meant. But one of the most vivid memories I have of those days was coming across my mother reading something called “The Black Book,” and crying.

The book was a compendium of Nazi atrocities. My mother said I was too young to hear about such things (as I recall, I was about five) but that I should always remember how lucky I was to live in the United States.

Years later, I read multiple historical and sociological analyses in an effort to understand how the Nazis came to power, how otherwise good people could participate in–or turn a blind eye to–what was happening. The lesson I took away began with an economic reality: when people are experiencing economic insecurity and privation–especially if they see that others are flourishing– resentments suppressed in better times surface, and the very human need to find someone or some group to blame for loss of status and/or security becomes incredibly easy for demagogues to manipulate.

There’s a reason that loss of the American middle class is so dangerous.

A recent book by an MIT economist paints a very troubling picture: America is now two countries, and one of those countries looks a lot like the third world.

 Peter Temin, Professor Emeritus of Economics at MIT, believes the ongoing death of “middle America” has sparked the emergence of two countries within one, the hallmark of developing nations. In his new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Temin paints a bleak picture where one country has a bounty of resources and power, and the other toils day after day with minimal access to the long-coveted American dream.

In his view, the United States is shifting toward an economic and political makeup more similar to developing nations than the wealthy, economically stable nation it has long been. Temin applied W. Arthur Lewis’s economic model – designed to understand the workings of developing countries – to the United States in an effort to document how inequality has grown in America.

Temin describes multiple contributing factors in the nation’s arrival at this place, from exchanging the War on Poverty for the War on Drugs to money in politics and systemic racism. He outlines the ways in which racial prejudice continues to lurk below the surface, allowing politicians to appeal to the age old “desire to preserve the inferior status of blacks”, encouraging white low-wage workers to accept their lesser place in society.

Temin lists policies that could begin to ameliorate the economic divide: Expanding education, updating infrastructure, forgiving mortgage and student loan debt, and programs to encourage social mobility for all Americans.

Right now, of course, the clear priority of Congress–let alone the current, deranged occupant of the Oval Office–is tax reduction for the wealthy at the expense of the already disadvantaged.

What’s that famous Santayana quote? Those who who fail to learn from history are doomed to repeat it.

Comments

Another Unequal New Year?

This is the last day of 2016, a year that most definitely will not be missed. It’s hard to know whether people of good will can make 2017 any better.

The United States will begin the new year by ushering in a President who promises to “make America great again.” Unfortunately, with every utterance and tweet, it becomes more obvious that his definition of “greatness” is an autocratic wet dream unconnected to either the common good or reality.

As discouraging as it may be to admit, the truth is that a significant percentage of the American public is equally delusional, especially when it comes to accurate assessments of the extent of current inequality, and America’s past economic “greatness.”

A 2015 article in Scientific American took a look at both myth and reality. It was titled “American Inequality: It’s Much Worse Than You Think,” and subtitled, “The great divide between our beliefs, our ideals, and reality.”

The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%. The Walton family, for example, has more wealth than 42% of American families combined.

Remember this infographic video that went viral several months ago? According to the article, it has been watched more than 16 million times.  I was one of those who was shocked by the distribution of wealth it showed, and I actually follow these matters fairly closely.

The great virtue of the Scientific American article, however, was not in schooling readers about the present chasm between the rich and the rest; it was in puncturing our ahistorical and fanciful belief that in America, success is an artifact of effort and hard work, that anyone willing to invest the necessary grit and determination can “make it,” and that American meritocracy means that entrepreneurial workers are not doomed to remain in whatever poverty or class they are born to.

It’s a lovely belief. The brutal reality, however, is very different.

In a study published early in 2015,

researchers found Americans overestimate the amount of upward social mobility that exists in society. They asked some 3,000 people to guess the chance that someone born to a family in the poorest 20% ends up as an adult in the richer quintiles. Sure enough, people think that moving up is significantly more likely than it is in reality. Interestingly, poorer and politically conservative participants thought that there is more mobility than richer and liberal participants…. We may not want to believe it, but the United States is now the most unequal of all Western nations. To make matters worse, America has considerably less social mobility than Canada and Europe.

This belief in American economic mobility doesn’t simply ignore the immense importance of family wealth and social connections, access to educational equality, and a wide range of discriminatory obstacles and structural social barriers.

Our stubborn belief in an American economic mobility that doesn’t exist creates an unwarranted optimism—an optimism that, ironically, is more prevalent among those at the bottom of the income distribution. And because we are optimistic—because we see opportunities that aren’t really there—we don’t get serious about correcting the social and financial structures that keep poor people poor.

The people who agreed with Trump that America was “great” at some indeterminate point in the past but is no longer so blessed seem to fall into two not mutually exclusive categories: those who resent the advancements of women, people of color and immigrants (America was great when “they” knew their place); and those who believe the mythology of a “lost” American mobility.

What would be great would be to make 2017 the year we began to restore content to our belief in American mobility and civic equality. A girl can dream….

Happy New Year.

 

Comments