JustUs

Delu­sional Democ­racy

Delu­sional Democ­racy Breeds Delu­sional Prosperity

Eco­nomic jus­tice would nat­u­rally lead to less eco­nomic inequal­ity. But mean­while, why does the U.S. inequal­ity pro­file look so much like that of a third-​world dictatorship?

Con­trary to pop­u­lar think­ing, many rev­o­lu­tions have not occurred because of a wide­spread desire for free­dom or democ­racy. They have been dri­ven by mass hatred and rejec­tion of eco­nomic inequal­ity. The poor have revolted against the rich for eons. For much of human his­tory the lack of free­dom was linked to eco­nomic inequal­ity. Those in power lim­ited per­sonal free­dom so they could con­trol the econ­omy and pre­vent a fair dis­tri­b­u­tion of wealth, allow­ing a rel­a­tively few to amass riches. Things change. If there is a spe­cial Amer­i­can cap­i­tal­ist genius it is main­tain­ing a sys­tem with con­sid­er­able free­dom but where eco­nomic inequal­ity is stag­ger­ing. Our free­dom sub­verts the need to revolt against the economy.

The unwrit­ten the­ory seems to be that if cit­i­zens have per­sonal free­dom they will ignore eco­nomic inequal­ity. And it seems to be work­ing well here in the United States of Afflu­ence. Aris­to­cratic power-​economic elites that really run the coun­try have done more than shred the struc­ture of our democ­racy under both Repub­li­can and Demo­c­ra­tic regimes. They have engi­neered an eco­nomic sys­tem that is destroy­ing the vaulted mid­dle class, cre­at­ing a sim­pler two-​class sys­tem: the wealthy and the work­ing poor. Amer­i­cans are kept in a dis­trac­tive state of con­sumer bor­row­ing and spend­ing. They never use their con­sumer power to chal­lenge the sys­tem. They are con­tin­u­ally fed eco­nomic lies. They are mostly blind to their delu­sional democ­racy and its flip side – delu­sional prosperity.

A new report from the Cen­ter for Eco­nomic and Pol­icy Research: “Is the U.S. a Good Model for Reduc­ing Social Exclu­sion in Europe?” by John Schmitt and Ben Zip­perer is just the lat­est in a long march of largely ignored stud­ies that reveal what the estab­lish­ment does not want Amer­i­cans to know.

What should be the talk of the town through­out the nation is ris­ing eco­nomic inequal­ity. Every time you hear some news report and sta­tis­tic about how well the Amer­i­can econ­omy is doing stop and ask your­self: But what’s the story on eco­nomic inequal­ity? Is eco­nomic pros­per­ity being shared? Is wealth dis­pro­por­tion­ately flow­ing to the wealthy, not just here but also increas­ingly exported to for­eign super-​rich?

This new report presents pow­er­ful data on net dis­pos­able house­hold income inequal­ity. Data on the Gini coef­fi­cient is the most com­mon mea­sure of income inequal­ity. This coef­fi­cient varies from zero – per­fect equal­ity – to one – just one house­hold hav­ing all the income. Data for 28 OECD coun­tries over the period 1990 to 2000 showed that the U.S. had the sec­ond high­est coef­fi­cient, at 0.37. Only Mex­ico, at 0.49, was higher; it is the sim­plest mea­sure of just how com­pletely screwed up Mex­ico is and why its cit­i­zens, rather than revolt­ing, are flee­ing to the U.S (though they tried for polit­i­cal change in their recent elec­tion). But as the Amer­i­can coef­fi­cient rises, where will Amer­i­cans run to?

Among Euro­pean nations, the United King­dom had the next high­est level of inequal­ity at 0.35, fol­lowed by Ire­land and Italy, both at 0.33. Coun­tries with the low­est lev­els – the great­est equal­ity – were Den­mark at 0.24 and Bel­gium, Fin­land, Ger­many, the Nether­lands, Nor­way and Swe­den at 0.25.

There are other use­ful ways to mea­sure eco­nomic inequal­ity that shed more light on this issue. One is the dis­tance between the 10th, the 50th, and the 90th per­centiles of the national income dis­tri­b­u­tion. Greater dis­tance between points in the dis­tri­b­u­tion sig­ni­fies greater over­all inequal­ity. In the U.S, the 10th per­centile house­hold earned about 39 per­cent of what the median house­hold earned, while the 90th per­centile house­hold earned about 210 percent

Eco­nomic jus­tice would nat­u­rally lead to less eco­nomic inequal­ity. But mean­while, why does the U.S. inequal­ity pro­file look so much like that of a third-​world dictatorship?

Con­trary to pop­u­lar think­ing, many rev­o­lu­tions have not occurred because of a wide­spread desire for free­dom or democ­racy. They have been dri­ven by mass hatred and rejec­tion of eco­nomic inequal­ity. The poor have revolted against the rich for eons. For much of human his­tory the lack of free­dom was linked to eco­nomic inequal­ity. Those in power lim­ited per­sonal free­dom so they could con­trol the econ­omy and pre­vent a fair dis­tri­b­u­tion of wealth, allow­ing a rel­a­tively few to amass riches. Things change. If there is a spe­cial Amer­i­can cap­i­tal­ist genius it is main­tain­ing a sys­tem with con­sid­er­able free­dom but where eco­nomic inequal­ity is stag­ger­ing. Our free­dom sub­verts the need to revolt against the economy.


The unwrit­ten the­ory seems to be that if cit­i­zens have per­sonal free­dom they will ignore eco­nomic inequal­ity. And it seems to be work­ing well here in the United States of Afflu­ence. Aris­to­cratic power-​economic elites that really run the coun­try have done more than shred the struc­ture of our democ­racy under both Repub­li­can and Demo­c­ra­tic regimes. They have engi­neered an eco­nomic sys­tem that is destroy­ing the vaulted mid­dle class, cre­at­ing a sim­pler two-​class sys­tem: the wealthy and the work­ing poor. Amer­i­cans are kept in a dis­trac­tive state of con­sumer bor­row­ing and spend­ing. They never use their con­sumer power to chal­lenge the sys­tem. They are con­tin­u­ally fed eco­nomic lies. They are mostly blind to their delu­sional democ­racy and its flip side – delu­sional prosperity.

A new report from the Cen­ter for Eco­nomic and Pol­icy Research: “Is the U.S. a Good Model for Reduc­ing Social Exclu­sion in Europe?” by John Schmitt and Ben Zip­perer is just the lat­est in a long march of largely ignored stud­ies that reveal what the estab­lish­ment does not want Amer­i­cans to know.

What should be the talk of the town through­out the nation is ris­ing eco­nomic inequal­ity. Every time you hear some news report and sta­tis­tic about how well the Amer­i­can econ­omy is doing stop and ask your­self: But what’s the story on eco­nomic inequal­ity? Is eco­nomic pros­per­ity being shared? Is wealth dis­pro­por­tion­ately flow­ing to the wealthy, not just here but also increas­ingly exported to for­eign super-​rich?

This new report presents pow­er­ful data on net dis­pos­able house­hold income inequal­ity. Data on the Gini coef­fi­cient is the most com­mon mea­sure of income inequal­ity. This coef­fi­cient varies from zero – per­fect equal­ity – to one – just one house­hold hav­ing all the income. Data for 28 OECD coun­tries over the period 1990 to 2000 showed that the U.S. had the sec­ond high­est coef­fi­cient, at 0.37. Only Mex­ico, at 0.49, was higher; it is the sim­plest mea­sure of just how com­pletely screwed up Mex­ico is and why its cit­i­zens, rather than revolt­ing, are flee­ing to the U.S (though they tried for polit­i­cal change in their recent elec­tion). But as the Amer­i­can coef­fi­cient rises, where will Amer­i­cans run to?

Among Euro­pean nations, the United King­dom had the next high­est level of inequal­ity at 0.35, fol­lowed by Ire­land and Italy, both at 0.33. Coun­tries with the low­est lev­els – the great­est equal­ity – were Den­mark at 0.24 and Bel­gium, Fin­land, Ger­many, the Nether­lands, Nor­way and Swe­den at 0.25.

There are other use­ful ways to mea­sure eco­nomic inequal­ity that shed more light on this issue. One is the dis­tance between the 10th, the 50th, and the 90th per­centiles of the national income dis­tri­b­u­tion. Greater dis­tance between points in the dis­tri­b­u­tion sig­ni­fies greater over­all inequal­ity. In the U.S, the 10th per­centile house­hold earned about 39 per­cent of what the median house­hold earned, while the 90th per­centile house­hold earned about 210 per­cent of the median. The Amer­i­can 10th per­centile earner was fur­ther below the median than every­where else except Mex­ico (28 per­cent). In other words, being poor in Mex­ico is much worse than being poor in the U.S. That’s why ille­gal immi­grants risk so much to get here. Euro­peans mostly do bet­ter than us: Italy (44), Ire­land (46), and the United King­dom (47), and even bet­ter in Nor­way (57), Swe­den (57), and the Nether­lands (56). Being poor in Europe is bet­ter than being poor in the U.S.

As to the 90th per­centile house­hold, here the wealthy do very well at 210 per­cent of the median, with Mex­ico even worse at 328 per­cent, and the rich do slightly bet­ter in Lux­em­bourg (215), and the United King­dom (215), but much worse in Den­mark (155), Slo­va­kia (162), Fin­land (164) and the Nether­lands (167).

Finally, the ratio of the 90th and 10th per­centile earn­ings is another mea­sure of income inequal­ity, with Mex­ico at 11.55 hav­ing, by far, high­est inequal­ity. The United States (5.45) was next, well ahead of the United King­dom (4.58), Aus­tralia (4.33), and Canada (4.13). The coun­tries with the low­est “9010″ gap were Nor­way (2.80), Den­mark (2.85), Slo­va­kia (2.88), Fin­land (2.90), and the Nether­lands (2.98). The point to remem­ber is that there are fine democ­ra­cies with far more eco­nomic equal­ity than we have.

An Amer­i­can myth is ter­rific upward eco­nomic mobil­ity. The report presents data on the share of low-​income fam­i­lies (where low-​income was defined as earn­ing less than half of the national median income) that escaped from low-​income sta­tus over a three-​year period in the mid-​1990s. The U.S. had the low­est share of low-​income work­ers that exit their low-​income sta­tus from one year to the next (29.5 per­cent). In con­trast, rates in sev­eral Euro­pean coun­tries are greater than 50 per­cent: Ire­land (54.6), the Nether­lands (55.7), the United King­dom (58.8), and Den­mark (60.4).

What about longer-​term inter­gen­er­a­tional mobil­ity? Researchers have inves­ti­gated the degree of cor­re­la­tion between fathers’ and sons’ incomes at dif­fer­ent points in time. Inter­gen­er­a­tional income coef­fi­cients quan­tify the eco­nomic advan­tage con­ferred by par­ents to their chil­dren. The higher the coef­fi­cient, the more likely are chil­dren born to poor par­ents remain­ing poor later in life. One study found the high­est degree of eco­nomic mobil­ity was in Ger­many (0.12), fol­lowed by Canada (0.18) and the United King­dom (0.27). In con­trast, inter­gen­er­a­tional eco­nomic mobil­ity was low­est, by a large mar­gin, in the United States (0.45). Other stud­ies also found a rel­a­tively high coef­fi­cient for the U.S., with high lev­els also in South Africa and the United King­dom, but much lower lev­els in Canada, Fin­land, Ger­many, Nor­way, Den­mark, and Sweden.

The report notes that “What appear to be small dif­fer­ences in inter­gen­er­a­tional income coef­fi­cients actu­ally imply sub­stan­tial dif­fer­ences in eco­nomic mobil­ity. Take, for exam­ple, the case of a fam­ily with earn­ings that are half of the national aver­age. Other fac­tors held con­stant, if a coun­try has a cor­re­la­tion coef­fi­cient for parent-​child earn­ings of 0.20, we would expect that descen­dants of the poor fam­ily would reach the aver­age national earn­ings in less than two gen­er­a­tions, or about 25 to 50 years. In coun­tries with a coef­fi­cient of 0.45, a typ­i­cal level in the esti­mates for the United States (and, in some cases, for the United King­dom), how­ever, descen­dants of the poor fam­ily would not, on aver­age, close the income gap with the aver­age fam­ily for more than three gen­er­a­tions, or about 75 to 100 years.”

It’s worth read­ing what the new report concluded:

      “The U.S. eco­nomic and social model is asso­ci­ated with sub­stan­tial lev­els of social exclu­sion, includ­ing high lev­els of income inequal­ity, high rel­a­tive and absolute poverty rates, poor and unequal edu­ca­tional out­comes, poor health out­comes, and high rates of crime and incarceration.

At the same time, the avail­able evi­dence pro­vides lit­tle sup­port for the view that U.S.-style labor-​market flex­i­bil­ity dra­mat­i­cally improves labor-​market out­comes. …The data also appear to con­tra­dict the belief that greater eco­nomic mobil­ity in the United States can some­how com­pen­sate for greater lev­els of inequal­ity and “social exclu­sion.” Despite pop­u­lar prej­u­dices to the con­trary, the U.S. econ­omy con­sis­tently affords a lower level of eco­nomic mobil­ity, both in the short-​term (from one year to the next) and in the longer-​term (across gen­er­a­tions), than all the con­ti­nen­tal Euro­pean coun­tries for which data are available.”

The hall­mark of delu­sional pros­per­ity is a wide­spread and stub­born belief that peo­ple who work hard will pros­per because of so much eco­nomic oppor­tu­nity. Yet data con­tin­u­ally show that work­ing– and middle-​class Amer­i­cans are not ben­e­fit­ing any­where near the extent that wealthy Amer­i­cans are. We may be a nation with great per­sonal free­dom, but we no longer have an econ­omy in which macro-​prosperity is shared. Like they say, the rich really are get­ting richer and every­one else is get­ting poorer. Fix­ing Amer­i­can democ­racy also means fix­ing our econ­omy. Oth­er­wise we are headed towards a class strug­gle of mon­u­men­tal pro­por­tions. Vot­ing against “estab­lish­ment” politi­cians in both major par­ties is a key way for Amer­i­cans to “revolt” against the polit­i­cal sys­tem. There is no com­pa­ra­ble way to rebel against our cruel econ­omy, except to leave it.

The long-​term trend in Amer­i­can eco­nomic inequal­ity is clear. The gov­ern­ment has mea­sured fam­ily or house­hold inequal­ity since 1947. In the post-​World War II era of 1947 to 1968, the coef­fi­cient decreased. In other words, in that period of pros­per­ity, eco­nomic inequal­ity decreased; there was real upward eco­nomic mobil­ity. Not coin­ci­den­tally, dur­ing that period the top mar­ginal fed­eral income tax rate was 90 or 70 per­cent. The coef­fi­cient dropped from 1947 to 1969. It remained sta­ble from 1973 to 1980. Since around 1980, the coef­fi­cient has risen pretty con­sis­tently, under Pres­i­dent Rea­gan, under Bush I, under Clin­ton, and under Bush II. The gov­ern­ment uses pre-​tax income, mak­ing the coef­fi­cient numer­i­cally higher than dis­pos­able income; it has risen from 0.35 in 1980 to 0.46 more recently. Experts believe that a coef­fi­cient of 0.5 likely pre­cip­i­tates social unrest. So the national mood of polit­i­cal dis­con­tent and dis­gust with the two-​party duop­oly is con­sis­tent with eco­nomic reality.

When will the Sec­ond Amer­i­can Rev­o­lu­tion begin? How much more eco­nomic mis­ery will it take? Maybe just a lit­tle more will bring the Amer­i­can pop­u­la­tion to the tip­ping point. We can hope.

of the median. The Amer­i­can 10th per­centile earner was fur­ther below the median than every­where else except Mex­ico (28 per­cent). In other words, being poor in Mex­ico is much worse than being poor in the U.S. That’s why ille­gal immi­grants risk so much to get here. Euro­peans mostly do bet­ter than us: Italy (44), Ire­land (46), and the United King­dom (47), and even bet­ter in Nor­way (57), Swe­den (57), and the Nether­lands (56). Being poor in Europe is bet­ter than being poor in the U.S.

As to the 90th per­centile house­hold, here the wealthy do very well at 210 per­cent of the median, with Mex­ico even worse at 328 per­cent, and the rich do slightly bet­ter in Lux­em­bourg (215), and the United King­dom (215), but much worse in Den­mark (155), Slo­va­kia (162), Fin­land (164) and the Nether­lands (167).

Finally, the ratio of the 90th and 10th per­centile earn­ings is another mea­sure of income inequal­ity, with Mex­ico at 11.55 hav­ing, by far, high­est inequal­ity. The United States (5.45) was next, well ahead of the United King­dom (4.58), Aus­tralia (4.33), and Canada (4.13). The coun­tries with the low­est “9010″ gap were Nor­way (2.80), Den­mark (2.85), Slo­va­kia (2.88), Fin­land (2.90), and the Nether­lands (2.98). The point to remem­ber is that there are fine democ­ra­cies with far more eco­nomic equal­ity than we have.

An Amer­i­can myth is ter­rific upward eco­nomic mobil­ity. The report presents data on the share of low-​income fam­i­lies (where low-​income was defined as earn­ing less than half of the national median income) that escaped from low-​income sta­tus over a three-​year period in the mid-​1990s. The U.S. had the low­est share of low-​income work­ers that exit their low-​income sta­tus from one year to the next (29.5 per­cent). In con­trast, rates in sev­eral Euro­pean coun­tries are greater than 50 per­cent: Ire­land (54.6), the Nether­lands (55.7), the United King­dom (58.8), and Den­mark (60.4).

What about longer-​term inter­gen­er­a­tional mobil­ity? Researchers have inves­ti­gated the degree of cor­re­la­tion between fathers’ and sons’ incomes at dif­fer­ent points in time. Inter­gen­er­a­tional income coef­fi­cients quan­tify the eco­nomic advan­tage con­ferred by par­ents to their chil­dren. The higher the coef­fi­cient, the more likely are chil­dren born to poor par­ents remain­ing poor later in life. One study found the high­est degree of eco­nomic mobil­ity was in Ger­many (0.12), fol­lowed by Canada (0.18) and the United King­dom (0.27). In con­trast, inter­gen­er­a­tional eco­nomic mobil­ity was low­est, by a large mar­gin, in the United States (0.45). Other stud­ies also found a rel­a­tively high coef­fi­cient for the U.S., with high lev­els also in South Africa and the United King­dom, but much lower lev­els in Canada, Fin­land, Ger­many, Nor­way, Den­mark, and Sweden.

The report notes that “What appear to be small dif­fer­ences in inter­gen­er­a­tional income coef­fi­cients actu­ally imply sub­stan­tial dif­fer­ences in eco­nomic mobil­ity. Take, for exam­ple, the case of a fam­ily with earn­ings that are half of the national aver­age. Other fac­tors held con­stant, if a coun­try has a cor­re­la­tion coef­fi­cient for parent-​child earn­ings of 0.20, we would expect that descen­dants of the poor fam­ily would reach the aver­age national earn­ings in less than two gen­er­a­tions, or about 25 to 50 years. In coun­tries with a coef­fi­cient of 0.45, a typ­i­cal level in the esti­mates for the United States (and, in some cases, for the United King­dom), how­ever, descen­dants of the poor fam­ily would not, on aver­age, close the income gap with the aver­age fam­ily for more than three gen­er­a­tions, or about 75 to 100 years.”

It’s worth read­ing what the new report concluded:

      “The U.S. eco­nomic and social model is asso­ci­ated with sub­stan­tial lev­els of social exclu­sion, includ­ing high lev­els of income inequal­ity, high rel­a­tive and absolute poverty rates, poor and unequal edu­ca­tional out­comes, poor health out­comes, and high rates of crime and incarceration.

At the same time, the avail­able evi­dence pro­vides lit­tle sup­port for the view that U.S.-style labor-​market flex­i­bil­ity dra­mat­i­cally improves labor-​market out­comes. …The data also appear to con­tra­dict the belief that greater eco­nomic mobil­ity in the United States can some­how com­pen­sate for greater lev­els of inequal­ity and “social exclu­sion.” Despite pop­u­lar prej­u­dices to the con­trary, the U.S. econ­omy con­sis­tently affords a lower level of eco­nomic mobil­ity, both in the short-​term (from one year to the next) and in the longer-​term (across gen­er­a­tions), than all the con­ti­nen­tal Euro­pean coun­tries for which data are available.”

The hall­mark of delu­sional pros­per­ity is a wide­spread and stub­born belief that peo­ple who work hard will pros­per because of so much eco­nomic oppor­tu­nity. Yet data con­tin­u­ally show that work­ing– and middle-​class Amer­i­cans are not ben­e­fit­ing any­where near the extent that wealthy Amer­i­cans are. We may be a nation with great per­sonal free­dom, but we no longer have an econ­omy in which macro-​prosperity is shared. Like they say, the rich really are get­ting richer and every­one else is get­ting poorer. Fix­ing Amer­i­can democ­racy also means fix­ing our econ­omy. Oth­er­wise we are headed towards a class strug­gle of mon­u­men­tal pro­por­tions. Vot­ing against “estab­lish­ment” politi­cians in both major par­ties is a key way for Amer­i­cans to “revolt” against the polit­i­cal sys­tem. There is no com­pa­ra­ble way to rebel against our cruel econ­omy, except to leave it.

The long-​term trend in Amer­i­can eco­nomic inequal­ity is clear. The gov­ern­ment has mea­sured fam­ily or house­hold inequal­ity since 1947. In the post-​World War II era of 1947 to 1968, the coef­fi­cient decreased. In other words, in that period of pros­per­ity, eco­nomic inequal­ity decreased; there was real upward eco­nomic mobil­ity. Not coin­ci­den­tally, dur­ing that period the top mar­ginal fed­eral income tax rate was 90 or 70 per­cent. The coef­fi­cient dropped from 1947 to 1969. It remained sta­ble from 1973 to 1980. Since around 1980, the coef­fi­cient has risen pretty con­sis­tently, under Pres­i­dent Rea­gan, under Bush I, under Clin­ton, and under Bush II. The gov­ern­ment uses pre-​tax income, mak­ing the coef­fi­cient numer­i­cally higher than dis­pos­able income; it has risen from 0.35 in 1980 to 0.46 more recently. Experts believe that a coef­fi­cient of 0.5 likely pre­cip­i­tates social unrest. So the national mood of polit­i­cal dis­con­tent and dis­gust with the two-​party duop­oly is con­sis­tent with eco­nomic reality.

When will the Sec­ond Amer­i­can Rev­o­lu­tion begin? How much more eco­nomic mis­ery will it take? Maybe just a lit­tle more will bring the Amer­i­can pop­u­la­tion to the tip­ping point. We can hope.

joomla tem­platesfree joomla tem­platestem­plate joomla
2017 Genet­icMem­ory glob­bers joomla tem­plate