Hannah Arendt Center for Politics and Humanities
5Jul/130

The Moral Roots of Income Inequality

ArendtWeekendReading

Inequality is not simply a matter of numbers and economics. Thomas Edsall explores at the moral and cultural roots of income inequality last week in the New York Times. His essay takes as its basis a recent speech by Alan B. Krueger, President Obama’s Chairman of the Council of Economic Advisers, entitled “Fairness as an Economic Force.” Here is one excerpt from Krueger’s speech:

In considering reasons for the growing wage gap between the top and everyone else, economists have tended to shy away from considerations of fairness and instead focus on market forces, mainly technological change and globalization. But given the compelling evidence that considerations of fairness matter for wage setting, I would argue that we need to devote more attention to the erosion of the norms, institutions and practices that maintain fairness in the job market. We also need to focus on the policies that can lead to more widely shared – and stronger – economic growth. It is natural to expect that market forces such as globalization would weaken norms and institutions that support fairness in wage setting. Yet I would argue that the erosion of the institutions and practices that support fairness has gone beyond market forces.

While globalization, outsourcing, and the rise of robots certainly are part of the reduction of wages and the hollowing out of the middle class, they do not tell the whole story.

peanuts

At a time when real wages are stagnant, CEO pay is skyrocketing, income at the highest levels of society is increasing disproportionately, and corporate profits as a share of Gross Domestic Product have reached record levels.

Importantly, Edsall notes that conservatives and liberals both have focused a light on this disintegration of the moral fabric of our society, though they often do so in very different ways. He begins his essay with a discussion of Charles Murray and David Brooks, each of whom argue that the economic and political problems we face have their roots in “disintegrating moral norms.”

While Krueger’s analysis is very different from Charles Murray’s or from David Brooks', all three share an interest in what they see as disintegrating moral norms. And there is something else that binds them: the trends that Murray, Brooks and Krueger deplore continue with unrelenting force. From Murray’s perspective, social decay and irresponsible behavior have spread into the broad working and lower middle class.

Liberals and conservatives often reject alliances on moral questions, and their analyses of the moral decay are meaningfully different. And yet, Edsall does well to bring them together and to remind us that radical inequality and political paralysis may have cultural and moral valences that transcend political affiliation.  His essay on “Our Broken Social Contract” is your weekend read.

You might also look at Alan Krueger’s speech, “Fairness as an Economic Force.” originally given at Oberlin College. I have written about Murray’s book Coming Apart, here and here.

-RB

7Jan/130

Can America Be Fixed?

One of our Arendt Center members sent me this latest article from Fareed Zakaria. The numbers can be dizzying, but the basic thesis is one that we at the Arendt Center have been worrying about: Overspending on entitlements and debt are bringing about a situation in which the essential public role of government is being crowded out by its social demands. As Zakaria writes,

The continued growth in entitlements is set to crowd out all other government spending, including on defense and the investments needed to help spur the next wave of economic growth. In 1960, entitlement programs amounted to well under one-third of the federal budget, with all the other functions of government taking up the remaining two-thirds. By 2010, things had flipped, with entitlement programs accounting for two-thirds of the budget and everything else crammed into one-third. On its current path, the U.S. federal government is turning into, in the journalist Ezra Klein's memorable image, an insurance company with an army. And even the army will have to shrink soon.

No doubt government has the role of helping its citizens in need. And our modern entitlement programs are an essential part of a just polity. But we now risk misunderstanding government for insurance. So much so that, according to the a report by Third Way, in 2029 the US will spend as much on social security, Medicare, Medicaid, and debt payments as it takes in from taxes. Everything else we want to spend money on as a country will have to come from either higher taxes or further debt.

The real problem here is not economic so much as political. It is easy to say that the US has always been partisan and that it is very American to disdain government.  Zakaria offers perspective, citing a 1975 report from the Trilateral Commission entitled The Crisis of Democracy, that predicted gloom in the United States and Europe. We should be aware of a human tendency to elevate our present difficulties into tragic flaws. And yet, simply because last time things worked out, we should not assume that they will this time as well.

What is different this time? While the United States remains a vibrant economy, its political system is increasingly broken. It is captured by special interests and addicted to debt. We spend $4 on our elderly population for every $1 we spend on our young. Schools are failing. We are cutting public pensions and obliterating private pensions outright with 401k savings programs that don’t provide people enough money to live on. Bridges are falling. Our roads, railways, and airports are in disrepair. And our political debate is consumed with taxes and spending. I know wise cynics say politics is politics, but the present idiocy does seem different. We should never assume that just because it worked out the last time, it will again. There are moments of new occurrences in politics. And it is possible that our current political crisis really does portend something new.

Image: Matt Collins

At least the public seems to think so:

Anger with politicians and institutions of government is much greater than it was in 1975. According to American National Election Studies polls, in 1964, 76 percent of Americans agreed with the statement "You can trust the government in Washington to do what is right just about always or most of the time." By the late 1970s, that number had dropped to the high 40s. In 2008, it was 30 percent. In January 2010, it had fallen to 19 percent.

Zakaria offers numbers upon numbers. I am sure some are more right than others. But the overall trend is undeniable. His essay is more than worth a read.

-RB

21Mar/120

Is Economic Inequality Becoming a Problem for Americans?

Is economic inequality becoming a problem for Americans? The common sense today is that OWS has put inequality on the agenda today in a way that is new in American politics. And today Eduardo Porter makes the argument that OWS is having some traction on the question of income inequality. While Americans traditionally are tolerant of inequality, that may be changing.

Our tolerance for a widening income gap may be ebbing, however. Since Occupy Wall Street and kindred movements highlighted the issue, the chasm between the rich and ordinary workers has become a crucial talking point in the Democratic Party’s arsenal. In a speech in Osawatomie, Kan., last December, President Obama underscored how “the rungs of the ladder of opportunity had grown farther and farther apart, and the middle class has shrunk.”

There are signs that the political strategy has traction. Inequality isn’t quite the top priority of voters: only 17 percent of Americans think it is extremely important for the government to try to reduce income and wealth inequality, according to a Gallup survey last November. That is about half the share that said reigniting economic growth was crucial.

Seventeen percent seem a low number of citizens concerned about inequality, but looking deeper, Porter argues that attitudes are changing.

A slightly different question indicates views have changed: 29 percent said it was extremely important for the government to increase equality of opportunity. More significant, 41 percent said that there was not much opportunity in America, up from 17 percent in 1998.

Statistics on income mobility are notoriously hard to measure and contested, but the surveys indicate that optimistic Americans are losing that sense of mobility and possibility. Even if people can and do often earn more than their parents, the vast rifts opening up between rich and middle class means that increasingly Americans live in different worlds. These vast divisions are now seen as a problem not only by liberals, but also by conservatives like Charles Murray, whose book Coming Apart bemoans the loss of a common sense of American values. There is a way in which the truly extraordinary gaps in income are unraveling the social contract that holds the country together.

In other words, even for those who are accepting of inequality and who believe in a meritocracy, excessive inequality cannot be justified.  As Porter writes:

One doesn’t have to believe in equality to be concerned about these trends. Once inequality becomes very acute, it breeds resentment and political instability, eroding the legitimacy of democratic institutions. It can produce political polarization and gridlock, splitting the political system between haves and have-nots, making it more difficult for governments to address imbalances and respond to brewing crises. That too can undermine economic growth, let alone democracy.

Read more here.

-RB