BBO Discussion Forums: Inequality - BBO Discussion Forums

Apropos of nothing, there's an old joke, the details of which I don't remember, which starts something like "a mathematician, a physicist, and an engineer are sharing a room. The mathematician wakes up to discover the window curtains are on fire…" As I recall, both the mathematician and the physicist woke up, observed the fire, perhaps did some calculations, then went back to sleep. The engineer, when he woke up, put out the fire. I admit to some fondness for this little tale, perhaps because I am by training and temperament an engineer.

Many years ago, in a high school physics class, my physics teacher (who was a real character) told the following story:

A researcher sat a (male) mathematician at one end of a couch and a beautiful woman at the other end of the couch. The researcher told the mathematician that he could halve the distance between himself and the woman every second. The mathematician threw up his arms in resignation, exclaiming "I will never reach her!"

The same researcher then replaced the mathematician with a (male) physicist. He gave the same instructions to the physicist. The physicist immediately went to the other end of the couch and put his arm around the woman, stating "for all practical purposes, the distance between us is zero!"

So, if you are ever asked to define the difference between a mathematician and an physicist, this might be your answer.

Perhaps you will like this: An optimist says, the glass is half-full; a pessimist says, the glass is half-empty; an engineer says, the glass is too big!

Perhaps you will like this: An optimist says, the glass is half-full; a pessimist says, the glass is half-empty; an engineer says, the glass is too big!

When Jennifer M. Silva was a graduate student looking around for a dissertation topic, she began to notice a genre of self-help books targeted to people her age suffering from a “quarter-life crisis.” The now-familiar premise was that privileged modern twentysomethings are overwhelmed with opportunities: Should they travel or marry, go back to school or settle down in a career? A first-generation college student herself, Silva had been tracing the country’s growing income inequality in her sociology research at the University of Virginia, and it occurred to her that contemporary working-class adults were suffering from a very different kind of crisis: a complete absence of choices.

Silva, who is now at Harvard University on a postdoctoral fellowship, set out to talk with some of these young people about how they were managing the transition to adulthood in the post-industrial economy. In 100 in-depth, in-person interviews, she found a new working-class adult “bewildered in the labor market, betrayed by institutions, distrustful of love, disconnected from others, and committed to emotional growth.”

Those conversations are at the heart of “Coming Up Short: Working-Class Adulthood in an Age of Uncertainty,” a brief yet devastating book that blends academic analysis and oral history to put a new face on well-documented trends that are more usually described in the abstract. The 21st-century labor market prizes flexibility, education, and technological skills—a landscape that benefits white-collar workers and leaves others struggling to adapt. Well-paying union jobs are being replaced by retail and food-service work, and a financial instability that hurts communities and personal relationships. Silva found people adapting to this landscape of dimmed hopes in surprising ways.

Instead of expressing frustration about their struggles, Silva found, they were adopting an entirely new definition of adulthood in which success was measured not by marriage and homeownership, but by defining and conquering emotional problems, mental illness, family chaos, and addiction. To her surprise, hard-won emotional self-management was often viewed with as much pride as diplomas or marriage certificates.

In an America once defined by the dream of getting ahead, this is a historic shift. As she observes, “it is difficult to imagine the iconic industrial steelworker or coal miner articulating, let alone opening up about, his psychic pain.”

Crumbling American Dreams

By ROBERT D. PUTNAM
My hometown — Port Clinton, Ohio, population 6,050 — was in the 1950s a passable embodiment of the American dream, a place that offered decent opportunity for the children of bankers and factory workers alike.

But a half-century later, wealthy kids park BMW convertibles in the Port Clinton High School lot next to decrepit “junkers” in which homeless classmates live. The American dream has morphed into a split-screen American nightmare. And the story of this small town, and the divergent destinies of its children, turns out to be sadly representative of America.

Growing up, almost all my classmates lived with two parents in homes their parents owned and in neighborhoods where everyone knew everyone else’s first name. Some dads worked in the local auto-part factories or gypsum mines, while others, like my dad, were small businessmen. In that era of strong unions and full employment, few families experienced joblessness or serious economic insecurity. Very few P.C.H.S. students came from wealthy backgrounds, and those few made every effort to hide that fact.

Half a century later, my classmates, now mostly retired, have experienced astonishing upward mobility. Nearly three-quarters of them surpassed their parents in education and in that way advanced economically as well. One-third of my classmates came from homes with parents who had not completed high school and, of that group, nearly half went to college.

Low costs at public and private colleges across Ohio were supplemented by locally raised scholarships — from the Rotary Club, the United Automobile Workers, the Junior Women’s Club and the like. Although the only two black students in my class encountered racial prejudice in town and none of their parents had finished grade school, both reached graduate school. Neither for them nor for our white classmates was family background the barrier to upward mobility that it would become in the next century.

Our (white) star quarterback, whom I will call J, grew up on the poor side of town. His dad, who had an eighth-grade education, worked two jobs to keep the family afloat — on the line at Port Clinton Manufacturing from 7 to 3, then at the canning factory from 3:30 to 11. Despite his 70-plus-hour workweek, J’s dad made it to J’s games. Unable to afford a car, J’s family hitched rides with neighbors to church every week and ate a lot of hash. Despite their modest background, J’s parents urged him to aim for college, and he chose the college-prep track at P.C.H.S., finishing in the top quarter of our class. His minister pointed him toward a downstate Lutheran institution and made a phone call to help find him financial aid. J graduated debt-free and continued on to seminary and a successful career as a Lutheran minister, coaching high school football on the side.

J’s rise from a well-knit but modest working-class family to a successful professional career was not atypical, as a recent survey of my classmates revealed. My classmates describe our youth in strikingly similar terms: “We were poor, but we didn’t know it.” In fact, however, in the breadth and depth of the social support we enjoyed, we were rich, but we didn’t know it.

As we graduated, none of us had any inkling that Port Clinton would change anytime soon. While almost half of us headed off to college, those who stayed in town had reason to expect a steady job (if they were male), marriage and a more comfortable life than their parents’.

But just beyond the horizon a national economic, social and cultural whirlwind was gathering force that would radically transform the life chances of the children and grandchildren of the graduates of the P.C.H.S. class of 1959. The change would be jaw dropping and heart wrenching, for Port Clinton turns out to be a poster child for changes that have engulfed America.

The manufacturing foundation of Port Clinton’s modest prosperity in the 1950s and 1960s began to tremble in the 1970s. The big Standard Products factory at the east end of town provided nearly 1,000 steady, good-paying blue-collar jobs in the 1950s, but the payroll was more than halved in the 1970s. After two more decades of layoffs and “give backs,” the plant gates on Maple Street finally closed in 1993, leaving a barbed-wire-encircled ruin now graced with Environmental Protection Agency warnings of toxicity. But that was merely the most visible symbol of the town’s economic implosion.

Manufacturing employment in Ottawa County plummeted from 55 percent of all jobs in 1965 to 25 percent in 1995 and kept falling. By 2012 the average worker in Ottawa County had not had a real raise for four decades and, in fact, is now paid roughly 16 percent less in inflation-adjusted dollars than his or her grandfather in the early 1970s. The local population fell as P.C.H.S. graduates who could escape increasingly did. Most of the downtown shops of my youth stand empty and derelict, driven out of business by gradually shrinking paychecks and the Walmart on the outskirts of town.

The social impact of those economic hammer blows was initially cushioned by the family and community bonds that had been so strong in my youth. But as successive graduating P.C.H.S. classes entered an ever worsening local economy, the social fabric of the 1950s and 1960s was gradually shredded. Juvenile-delinquency rates began to skyrocket in the 1980s and were triple the national average by 2010. Not surprisingly, given falling wages and loosening norms, single-parent households in Ottawa County doubled from 10 percent in 1970 to 20 percent in 2010, while the divorce rate more than quadrupled. In Port Clinton itself, the epicenter of the local economic collapse in the 1980s, the rate of births out of wedlock quadrupled between 1978 and 1990, topping out at about 40 percent, nearly twice the race-adjusted national average (itself rising rapidly).

Unlike working-class kids in the class of 1959, many of their counterparts in Port Clinton today are, despite toil and talent, locked into troubled, even hopeless lives. R, an 18-year-old white woman, is almost the same age as my grandchildren. Her grandfather could have been one of my classmates. But when I went off to college on a scholarship from a local employer, he skipped college in favor of a well-paid, stable blue-collar job. Then the factories closed, and good, working-class jobs fled. So while my kids, and then my grandchildren, headed off to elite colleges and successful careers, his kids never found steady jobs, were seduced by drugs and crime, and burned through a string of impermanent relationships.

His granddaughter R tells a harrowing tale of loneliness, distrust and isolation. Her parents split up when she was in preschool and her mother left her alone and hungry for days. Her dad hooked up with a woman who hit R, refused to feed her and confined R to her room with baby gates. She says her only friend was a yellow mouse who lived in her apartment. Caught trafficking drugs in high school, R spent several months in a juvenile detention center and failed out of high school, finally eking out a diploma online. Her experiences left her with a deep-seated mistrust of anyone and everyone, embodied by the scars on her arms where a boyfriend injured her in the middle of the night. R wistfully recalls her stillborn baby, born when she was 14. Since breaking up with the baby’s dad, who left her for someone else, and with a second fiancé, who cheated on her after his release from prison, R is currently dating an older man with two infants born to different mothers — and, despite big dreams, she is not sure how much she should hope for.

R’S story is heartbreaking. But the story of Port Clinton over the last half-century — like the history of America over these decades — is not simply about the collapse of the working class but also about the birth of a new upper class. In the last two decades, just as the traditional economy of Port Clinton was collapsing, wealthy professionals from major cities in the Midwest have flocked to Port Clinton, building elaborate mansions in gated communities along Lake Erie and filling lagoons with their yachts. By 2011, the child poverty rate along the shore in upscale Catawba was only 1 percent, a fraction of the 51 percent rate only a few hundred yards inland. As the once thriving middle class disappeared, adjacent real estate listings in the Port Clinton News Herald advertised near-million-dollar mansions and dilapidated double-wides.

The contrast with the egalitarian ethos and reality of the 1950s — the contrast between the upward mobility experienced by J and the bleak prospects of R — vividly captures Port Clinton’s transformation in the last half-century, much like that of the rest of the country. My research team has talked with dozens of R’s from Austin, Tex., to Duluth, Minn., and from Atlanta to Orange County, Calif.

The crumbling of the American dream is a purple problem, obscured by solely red or solely blue lenses. Its economic and cultural roots are entangled, a mixture of government, private sector, community and personal failings. But the deepest root is our radically shriveled sense of “we.” Everyone in my parents’ generation thought of J as one of “our kids,” but surprisingly few adults in Port Clinton today are even aware of R’s existence, and even fewer would likely think of her as “our kid.” Until we treat the millions of R’s across America as our own kids, we will pay a major economic price, and talk of the American dream will increasingly seem cynical historical fiction.

We have become great because of the lavish use of our resources and we have just reason to be proud of our growth. But the time has come to inquire seriously what will happen when our forests are gone, when the coal, the iron, the oil and the gas are exhausted, when the soils have been still further impoverished and washed into the streams, polluting the rivers, denuding the fields, and obstructing navigation. These questions do not relate only to the next century or to the next generation. It is time for us now as a nation to exercise the same reasonable foresight in dealing with our great natural resources that would be shown by any prudent man in conserving and widely using the property which contains the assurance of well-being for himself and his children.

To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day.

This country belongs to the people. Its resources, its business, its laws, its institutions, should be utilized, maintained, or altered in whatever manner will best promote the general interest.

While Roosevelt was campaigning in Milwaukee, Wisconsin, on October 14, 1912, a saloonkeeper named John Flammang Schrank shot him, but the bullet lodged in his chest only after penetrating his steel eyeglass case and passing through a thick (50 pages) single-folded copy of the speech he was carrying in his jacket. Roosevelt, as an experienced hunter and anatomist, correctly concluded that since he was not coughing blood, the bullet had not completely penetrated the chest wall to his lung, and so declined suggestions he go to the hospital immediately. Instead, he delivered his scheduled speech with blood seeping into his shirt. He spoke for 90 minutes. His opening comments to the gathered crowd were, "Ladies and gentlemen, I don't know whether you fully understand that I have just been shot; but it takes more than that to kill a Bull Moose." Afterwards, probes and x-ray showed that the bullet had traversed three inches (76 mm) of tissue and lodged in Roosevelt's chest muscle but did not penetrate the pleura, and it would be more dangerous to attempt to remove the bullet than to leave it in place. Roosevelt carried it with him for the rest of his life.

I had known about Roosevelt. I lived in Milwaukee for a time -- lots and lots of parks (not surprising, I guess, since the elected mayors were from the Socialist party up through 1960). Teddy Roosevelt would kick today's republicans, almost all of them republicans-in-name-only, in the teeth for the way they behave. It would be wonderful to have real republicans to vote for again, but the super-rich simply won't allow it.

I knew Teddy Roosevelt was a liberal Republican who said things like this:


I didn't know he was also a strong supporter of corporate regulation and consumer protection who said things like this:



Didn't know about this story either

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age—or, as Piketty likes to put it, a second Belle Époque—defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work. In particular, he and a few colleagues (notably Anthony Atkinson at Oxford and Emmanuel Saez at Berkeley) have pioneered statistical techniques that make it possible to track the concentration of income and wealth deep into the past—back to the early twentieth century for America and Britain, and all the way to the late eighteenth century for France.

The result has been a revolution in our understanding of long-term trends in inequality. Before this revolution, most discussions of economic disparity more or less ignored the very rich. Some economists (not to mention politicians) tried to shout down any mention of inequality at all: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004. But even those willing to discuss inequality generally focused on the gap between the poor or the working class and the merely well-off, not the truly rich—on college graduates whose wage gains outpaced those of less-educated workers, or on the comparative good fortune of the top fifth of the population compared with the bottom four fifths, not on the rapidly rising incomes of executives and bankers.

It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.

Still, today’s economic elite is very different from that of the nineteenth century, isn’t it? Back then, great wealth tended to be inherited; aren’t today’s economic elite people who earned their position? Well, Piketty tells us that this isn’t as true as you think, and that in any case this state of affairs may prove no more durable than the middle-class society that flourished for a generation after World War II. The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

It’s a remarkable claim—and precisely because it’s so remarkable, it needs to be examined carefully and critically. Before I get into that, however, let me say right away that Piketty has written a truly superb book. It’s a work that melds grand historical sweep—when was the last time you heard an economist invoke Jane Austen and Balzac?—with painstaking data analysis. And even though Piketty mocks the economics profession for its “childish passion for mathematics,” underlying his discussion is a tour de force of economic modeling, an approach that integrates the analysis of economic growth with that of the distribution of income and wealth. This is a book that will change both the way we think about society and the way we do economics.

...

Why didn’t the universally enfranchised citizens of France vote in politicians who would take on the rentier class? Well, then as now great wealth purchased great influence—not just over policies, but over public discourse. Upton Sinclair famously declared that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Piketty, looking at his own nation’s history, arrives at a similar observation: “The experience of France in the Belle Époque proves, if proof were needed, that no hypocrisy is too great when economic and financial elites are obliged to defend their interest.”

The same phenomenon is visible today. In fact, a curious aspect of the American scene is that the politics of inequality seem if anything to be running ahead of the reality. As we’ve seen, at this point the US economic elite owes its status mainly to wages rather than capital income. Nonetheless, conservative economic rhetoric already emphasizes and celebrates capital rather than labor—“job creators,” not workers.

In 2012 Eric Cantor, the House majority leader, chose to mark Labor Day—Labor Day!—with a tweet honoring business owners:


Perhaps chastened by the reaction, he reportedly felt the need to remind his colleagues at a subsequent GOP retreat that most people don’t own their own businesses—but this in itself shows how thoroughly the party identifies itself with capital to the virtual exclusion of labor.

Nor is this orientation toward capital just rhetorical. Tax burdens on high-income Americans have fallen across the board since the 1970s, but the biggest reductions have come on capital income—including a sharp fall in corporate taxes, which indirectly benefits stockholders—and inheritance. Sometimes it seems as if a substantial part of our political class is actively working to restore Piketty’s patrimonial capitalism. And if you look at the sources of political donations, many of which come from wealthy families, this possibility is a lot less outlandish than it might seem.

Piketty ends Capital in the Twenty-First Century with a call to arms—a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

We are witnessing a reversion to tribalism around the world, away from nation states. The same pattern can be seen even in America -- especially in American politics.

From Paul Krugman's NYRB review of Thomas Piketty's "Capital in the Twenty-First Century":

That’s according to a forthcoming article in Perspectives on Politics by Martin Gilens of Princeton University and Benjamin I. Page of Northwestern University. The two looked at a data set of 1,779 policy issues between 1981 and 2002 and matched them up against surveys of public opinion broken down by income as well as support from interest groups.
They estimate that the impact of what an average citizen prefers put up against what the elites and interest groups want is next to nothing, or “a non-significant, near-zero level.” They note that their findings show “ordinary citizens…have little or no independent influence on policy at all.” The affluent, on the other hand, have “a quite substantial, highly significant, independent impact on policy,” they find, “more so than any other set of actors” that they studied. Organized interest groups similarly fare well, with “a large, positive, highly significant impact on public policy.”

From their paper



Leaving out the institutionalized, are they? Most undemocratic.

I guess I have no clear idea of what the 50th percentile's preferences are with respect to, say, all day kindergarten. I also am not so sure that we should decide what to do by a survey that determines what the 50th percentile wants. Unless they think like I do, then it's ok.


What I get out of this is along the lines of: If Bill Gates, Sergei Brin, and I all call the Secretary of Education to tell him our plans for improving education, and if the Secretary has time to speak to only two of us, I probably will have to call back later. I am pretty sure that they are right about that.