American inequality

By Rod Dreher • November 9, 2011, 7:46 AM

I spoke last evening by phone with a friend of mine, a business executive and small private investor in Amsterdam. He called just to check in. We always like to talk politics. He said, “You know I’m a capitalist, but I don’t understand your country at all. How can you stand to have such a huge gap between the very rich and everybody else? I think here in the Netherlands, we have too much forced equality, but you go too far in the other direction. This is something none of us get: why aren’t more of you in the streets demanding that things change?”

I gave him my opinions on that, but he still seemed mystified why we Americans settle for what we do.

In that spirit, here are some things to think about from Megan McArdle. Excerpt:

I don’t care about income inequality. I care about the absolute condition of the poor–whether they are hungry, cold, and sick. But I do not care about the gap between their incomes, and those of Warren Buffett and Bill Gates. Nor the ratio of Gates and Buffett’s incomes to mine. And I’m not sure why anyone should. Other than pure envy, it’s hard to see how I could somehow be made worse off if Bill Gates’ income suddenly doubled, but everything else remained the same.

But while I do not care about gaps and ratios, I do care about opportunity. It is fine that CEOs earn many times what their workers do–but it is not fine if some are born to be workers, and others to be CEOs. And unfortunately, that increasingly seems to be the story in America.

The old aristocracy was, I think, at least dimly aware that it wasn’t quite fair for them to have what they had by mere virtue of being born to the right parents. But in the new aristocracy, it is rarely enough to just get born to the right parents; you also have to work very hard. (Higher earning men are now more likely to work more than 50 hours a week than are men in lower earnings quintiles.) Whatever the systemic injustices, it’s also quite clear to everyone . . . even parasitic leeches of investment bankers . . . that their salaries only come as the result of frantic effort.

The ability of one’s parents to confer such enduring advantages is obviously unfair. And while I don’t want to say that a society cannot last that way–obviously, many have, for hundreds of years–I don’t think it’s healthy for society. It is hard to get civic engagement, or respect for the law, when the bottom 40% or so feels that the game is rigged.

Seems like in the America we have created, not only can’t you get ahead economically, but if you do, you probably won’t have much of a life. Is this what we want? Is this what we should want?

23 Responses to American inequality

Rollo Tomassi says:

November 9, 2011 at 8:07 am

The reason Europe can have more economic equality (for now) is that they have a racially and culturally similar peoples. As immigration changes those nations, watch for all the signs – political and economic – that America has faced for nearly 50 years. But in the US we always had a frontier with natural resources and a common Christian tradition, and this allowed for opportunity and cultural melting. Those days are gone for us, starting around ’65, and there is no going back.

For Europe, they could have solid population density due to the shared values of racial and cultural unity. Sadly, those days are gone too due to demographic collapse. Immigration is changing the unity of the culture (ask them when you meet them about what their cities look like), and each nation will slowly slip into what we see in Greece right now – political and cultural gridlock.

For those who doubt that nations and peoples really are different, examine Germany and Spain – work ethic, values, culture, food. Same Christian culture for a long time, but WAY different IQ and work ethic. However, as native Germans and Spaniards are slowly overrun due to historically low birth rates, it will soon look like California does today, starting in the cities first and eventually driving the native population into enclaves to protect their culture. It won’t work. A people and nation is either growing and pushing their borders or slowly collapsing and getting taken over; that’s how nature works. One can learn it in any biology class. However, evolution is not really believed by our ruling elite, in America or Europe.
Turmarion says:

November 9, 2011 at 8:13 am

The article you linked to is pretty good–I read it yesterday–but I vehemently disagree with the first two paragraphs cited.

I think McArdle makes the same mistake–or has the same ideological view, not sure which–that a lot do. In effect, she’s saying, “As long as the poor are not destitute, as long as those on the lowest rungs have their basic needs met, as long as there’s opportunity, it doesn’t matter what the income gap is and how much richer the rich are than everyone else–and anyone who disagrees could be motivated only by envy.”

I think what this fails to realize is that the same macroeconomic forces that tend to produce huge gaps in income are the same ones that ultimately end in the lower opportunity, greater poverty, lower well-being for the poor, etc. There is actually research indicating that countries with high income gaps between the rich and poor have worse health overall, even in wealthy nations. Other negative effects have been postulated and in some cases documented.

I think there are a lot, like McArdle, who honestly see frustration with or opposition to high inequality in income distribution as borderline Commie, bash-the-rich, envy. That’s also a nice rhetorical way to dismiss such concerns from the realm of polite discourse. Unfortunately that sweeps the issue under the rug and allows it to fester.

I think it’s also the case that Americans don’t see it as a problem because 1. they unrealistically think that they, too, may some day hit it big and be in the 1% themselves–the old Horatio Alger mythos, and 2. since from the post WW II period until recently there was pretty good opportunity and social mobility in this country, most people felt broadly contented with the status quo. Maybe if things continue going the way they do people will wake up and demand change.
Park Hyun says:

November 9, 2011 at 8:32 am

I’m not sure the premise is correct. I think we do care a lot about how far it’s gone, we just are stuck with a political system in which a small minority can block effective change, and that small minority thinks even talking about the issue will lead to Bolshevik revolution.

Just because the time isn’t right to hit the streets doesn’t mean a whole lot of people aren’t looking forward to that time.
Pyrrho says:

November 9, 2011 at 8:42 am

Higher earning men are now more likely to work more than 50 hours a week than are men in lower earnings quintiles.

[N]ot only can’t you get ahead economically, but if you do, you probably won’t have much of a life.

I’d like to say more about this, but I have a full day and evening of work to do leading up to my departure on a business trip tomorrow.

Sigh.
JohnH says:

November 9, 2011 at 8:56 am

Sometimes it is nice to be The Man in the Grey Flannel Suit.
merithahahacracy says:

November 9, 2011 at 8:59 am

I wonder how many members of the “meritocracy” benefited from affirmative action, from exaggerated Christian guilt about antisemitism, from immigration opportunities that weren’t available to the real “best and brightest” in the countries they immigrated from, from toeing the politically correct line instead of thinking independently. And from treating America as a stepping stone to their own advancement instead of as an end in itself.

People with wealth or position are easily persuaded that belong where they are, and get very touchy when you show them how much of what they like to think as having been earned by “merit” is really just a species of good fortune – or unfair advantage.
Roberto says:

November 9, 2011 at 9:12 am

“For those who doubt that nations and peoples really are different, examine Germany and Spain – work ethic, values, culture, food. Same Christian culture for a long time, but WAY different IQ and work ethic.”

Nothing like a bracing does of Rassenhygiene in the morning, especially coming from a guy named “Rollo Tomassi.”

This kind of crap is why I can never call myself a “conservative.” I know that few conservatives believe this but they do seem to tolerate it. I think they get off on the frisson of being naughty.
Clare Krishan says:

November 9, 2011 at 9:24 am

Megan preaches it’s the “other” that’s the barbarian and not “people like us”. Her kind of communitarian trusts that the counterparty risk of leveraged central banking clients is someone else’s problem, she lauds those who “work hard” to benefit from QE while the rest of us are left holding the downside bag of qualitative easing: her much vaunted Fed piggy bank is stuffed wth paper instruments, many of which aren’t worth the paper they’re written on ( see today’s Fanny Mae mega-million write-offs).

Who she’s gonna call when poverty hits home at retirement? Our faith in corporate and civic unfunded liabilities looks a lot more like “…worship of a barbarous relic” than facing the discipline and humility of an internationally verifiable gold standard.

No Megan its FIAT central banking that’s barbaric… “Socialism fails because it runs out of other peoples’ money to spend” Margaret Thatcher

System failure is what this is, condescension from a privileged perch won’t help pundits like her much longer. Capital only has an actual value for the sacrifices taken to accrue and invest in present uses, it has no future certainty. That’s why future returns are always discounted by interest rates. Social capital not invested in present uses (unemployment) adds to that discount not detracts, you cannot get full employment by the Fed manipulating the money supply, all you get is inflation, which eats away ALL prior attainments, ie accrued capital : you’re biting off your nose to spite your face. Its cannabalism is what it is (and Market Ticker agrees)!

Its her alma mater fixation that her undoing, Milton Friedman and the Chicago school are so passe. Proof? Contagion spreads.
Clare Krishan says:

November 9, 2011 at 9:33 am

Cannabalistic inequality/annihiliation of social capital is not a new phenomena:
http://www.thepublicdiscourse.com/2011/11/4256
Solzenyzin warned us decades ago
Lord Karth says:

November 9, 2011 at 9:46 am

Pyrrho writes: “I’d like to say more about this, but I have a full day and evening of work to do leading up to my departure on a business trip tomorrow.”

Solidarity, fellow warrior. I hear you !

As usual, Ms. McArdle misses some important things. Like personal behavior. Having a child out of wedlock has long been associated with poverty, and the American ba$tardy rate is much, much higher than in Europe.

Secondly, Ms. McArdle does not take into account the phenomenon of “assortative mating”. Increasingly, men of a particular class will marry women of the same class. The college-educated will marry the college-educated. It used to be that it was possible for a college man to marry his business-school-graduate secretary, but that is increasingly rare, thanks to (among other things) stratification in housing markets over the last 30 years.

Third, globalization has meant that relatively high-wage American workers face more competition from foreign, lower-paid workers of similar skill. This will tend to drive down American wages, and induce the Americans to work longer hours to avoid declines in their expected standard of living.

Finally, the American worker, particularly the young American worker, faces an historically unusual financial fact: relatively high student loan debt. This both requires the longer hours—having to run faster than the next fellow over simply to stay in place, financially speaking–and prevents them from building the individual capital necessary to start their own firms and (presumably) give them more control over their own time and lives.

There are other factors involved, I’m sure, but these come to my mind as The Big Ones that dominate this particular problem.

Now, please excuse me….it’s time for me to start my 12-hour working day. And I don’t even have a business trip out of town to look forward to, either. Futz !

Your servant,

Lord Karth
Rollo Tomassi says:

November 9, 2011 at 9:55 am

Roberto, I know that few conservatives believe this but they do seem to tolerate it. I think they get off on the frisson of being naughty.

No. The fact that Germany has one hell of a work ethic compared to Spain or Italy is not only obvious to both peoples, it’s statistically verifiable.

The fact that native Germans have a higher IQ on average than Spaniards or Italians is also a fact, and one that is statistically verifiable. But it shouldn’t be necessary for anyone to see the data; merely count Nobel prizes or scientific discoveries.

The amazing thing about liberals is how ignorant about reality they are. Simply willingly blind. Conservatives tend to be more open to reality, even religious fundies, than liberals. Less ideological is my guess, but I’ve often wondered.
TTT says:

November 9, 2011 at 10:24 am

McArdle overlooks the fact that most wealth in this country is inherited, with many of those enjoying it having done nothing to earn it at all. And the fable-driven casino of Wall Street is not real work either-it doesn’t involve real things and produces nothing of value.

Extreme wealth inequality and lack of social mobility are terrible for democracies. Like the people of whom she writes, McArdle takes much too much for granted.
Turmarion says:

November 9, 2011 at 10:28 am

What they hey, Rollo, I’ll call your “Germans are smarter and harder workers than the dumb, lazy Spaniards” and raise you a Godwin’s Law by pointing out that lots of eminent Germans–Himmler and Göring, for example–used to be very–uh, vigorous–proponents of such theories. They even had plans to take care of such discrepancies by getting enough Lebensraum and…well, you know.

Beyond that, Rollo, I’m not inclined to argue except to point out that the study of human intelligence is more complicated, less-clear cut, and less understood that is widely appreciated. If you care to go back to the thread on gifted children, I posted several links regarding epigenetic factors influencing intelligence–that is, the increasing understanding that the same genes (for intelligence or anythinge else) can manifest themselves very differently, depending on environment.

I totally agree with Roberto here, and maybe it’s me, but I seem to notice a lot more “race realist” types lurking around here than I ever used to see on Rod’s older blogs. If it weren’t so disturbing it’d be amusing, especially since it’s coming out of the woodworks on threads to which it’s not even related. I mean, how the &*%$ does Herrenvolk rhetoric have the least thing to do with the topic of this thread to begin with? Unless, of course, the increasing gap in the incomes between the wealthy and poor in this country is related to the superior genetic legacy of the former–which I’m sure they’d like to believe, but which is pure hooey.
Lord Karth says:

November 9, 2011 at 10:31 am

Most of the wealth in this country is corporate; that is, it is held collectively by the shareholders of organizations. (TTT, you may have a problem with elements of the managerial class that has run rampant and skimmed off some of that wealth for itself, but you should not necessarily go after the owners simply for being owners. Not all of them are the same.)

That is, unless and until the senior cadres of the State apparatus decide that they know how to make better use of it than you or the other shareholders can.

Your servant,

Lord Karth
Tiparillo says:

November 9, 2011 at 10:35 am

I’ll just point to this Ted Talk again that indiactes the negative impact the income gap has on society and the point the speaker makes that it has a negative impact on the top of the gap. The study shows that outcomes are worse for those at the top of the gap in countries where the gap is widest than for those at the top in more equal countries:.

http://www.ted.com/talks/richard_wilkinson.html
Park Hyun says:

November 9, 2011 at 10:44 am

Rollo,

I think the problem here is that we’re talking about inequality, but you really want to talk about how your racial theories from the 19th century are valid.

Now, there could be LOTS of reasons for differing inequality levels between the US and Europe: world wars wiped out Europe’s social structures, older communities provide greater social support, parliamentary systems allow for quicker and greater government regulation, no racial slavery left no legacy of splitting workers and no build-up of wealth in certain hands in certain regions, or even weather patterns that require less or more labor-intensive farming. But you skip all that and leap up to scream that it’s all about race.

That’s why what you’re saying is, literally, racist. Ad hominem attacks on people who point that out won’t change the fact that you’re more interested in a nation’s racial makeup than its actual situation.
Bruce Ross says:

November 9, 2011 at 10:56 am

McArdle’s thesis — “I don’t care about income inequality. I care about the absolute condition of the poor — whether they are hungry, cold, and sick.” — ignores how economic growth and technical progress change society’s definition of poverty.

Most obviously, in the first half of the 20th century, there wasn’t much medical care — as opposed to comfort and hand holding — worth having. I believe one of President Hoover’s sons died of an infection after hurting his toe playing lawn tennis outside the White House. Today, helping the poor stay physically well can be an expensive endeavor indeed. In a similar vein, not even Rockefellers and Carnegies had home electricity until late in the 19th century — so plainly the poor weren’t suffering without it. Today, however, we make extensive accommodations to ensure the poor can keep their utilities turned on, and indeed on the flip side in many places they’ll red-tag your house if you live in it without power.

Remember the recent Heritage study that documented how many poor people had various common appliances and gadgets? It was widely mocked on the left as the “They’re not poor, they have a refrigerator!” study. Well, I don’t know where on the list of modern amenities, I’d draw the line, but a refrigerator is certainly not a luxury but a part of a decent standard of living in 2011 America.

There’s just no such thing as an objective measure of “poor” aside from what everyone else has.
JLF says:

November 9, 2011 at 11:40 am

With respect to the “politics of envy” and the wealthy, I’m pretty sure we are confusing cause and effect. Increasing disparity between haves and have nots is a concern, not because of what the haves have. Rather it is a concern because of HOW the haves came into their good fortune. The fact of the matter is that the more equal the incomes and wealth of a society the more stable the society and the more efficient markets tend to work. For that reason, government has an interest in seeing that the rules are adjusted to produce a greater degree of parity, not because of “envy” of the rich but because of the overall health of society that comes from more equality.
Scott in PA says:

November 9, 2011 at 12:14 pm

“… but it is not fine if some are born to be workers, and others to be CEOs. And unfortunately, that increasingly seems to be the story in America.”

Wrong. That’s the wasy it has always been with humanity: not everyone is born with the same inate abilities.
Ken Hoop says:

November 9, 2011 at 3:12 pm

TTT, on November 9th, 2011 at 10:24 am Said:
McArdle overlooks the fact that most wealth in this country is inherited, with many of those enjoying it having done nothing to earn it at all. And the fable-driven casino of Wall Street is not real work either-it doesn’t involve real things and produces nothing of value.

http://www.counterpunch.org/2011/11/09/talking-with-matt-taibbi/

Evidently taibbi’s new book speaks to this.
JonF says:

November 9, 2011 at 7:07 pm

The notion that Spaniards and Germans are genetically distinct races is ludicrous. The Celts lived in northern Spain and in Southern Germany. The Romans posted legions to Spain and the borders of Germania (and the legionaires were not celibate monks). Crusaders and mercenaries from all over Europe joined in the Spanish Reconquista. The Hapsburgs were an Austrian clan who took on the rule of Spain for two centuries and imported all manner of hangers on, from servants to noble grandees, from their German realms.

I can see why people might think Zulus and Norwegians are racially distinct– but no two peoples in Europe can be considered so.
Siarlys Jenkins says:

November 10, 2011 at 1:08 am

Megan McArdle must think that money grows on trees. Bill Gates’s money doesn’t simply grow overnight in his pocket. If he takes a bigger share of the revenue flowing in to Microsoft, the company’s employees’ have less. If wages go up, there is less for Gates. If he buys low and sells high, someone bought hi and sold low. The reason it was unlawful for Martha Stewart to sell her stock at $60 a share just before the value dropped sharply, is that whoever bought it at $60 saw THEIR money cut in half, or worse, when the value fell.
KateLE says:

August 4, 2012 at 10:18 am

Scott in PA:

“… but it is not fine if some are born to be workers, and others to be CEOs. And unfortunately, that increasingly seems to be the story in America.”

Wrong. That’s the wasy it has always been with humanity: not everyone is born with the same inate abilities.

I think what McArdle is expressing here is a fear of heading towards a society where inate ability means nothing, and your talent for picking your parents is the only factor in determining what type of work you end up performing.