Once Upon a Time in America

In a recent provocative article in Commonweal Charles Morris contended that the United States has created a plutocracy that appears to be turning into “a creaky, debt-ridden, class-based, and post-imperial society.” Of his propositions I focus here on some of the implications of growing income inequality and its relationship to class and mobility in the United States. For much of the post-World War II period the richest 1 percent of U.S. citizens reported incomes that comprised 8-10 percent of all taxable income in the nation. The share of national income of that small group rose in the 1970s and thereafter until it reached 24 percent of all taxable income in 2007, the greatest percentage the richest of Americans have enjoyed since 1928. Obviously, a trebling of the nation’s income accruing to a tiny group of Americans within a scant three decades was likely to have consequences. And so it has, creating a marked change in Americans’ social mobility. In the United States today, parental income has a 50 percent weight in predicting children’s incomes⎯a level equaled only by the United Kingdom⎯ resulting in the lowest social mobility rate among 9 major industrialized nations.

This income shift may be coupled with stagnating real wages since 1973 for the largest share of Americans and the declining availability of health and other benefits, including retirement packages, for millions of workers, particularly with the collapse of the stock market in 2008. When so considered, these factors together produce a bleak picture for the average US family struggling to make ends meet. And, of course, in the aftermath of the recent recession, national unemployment has hovered between 9 and 10 percent, not including a large number of individuals who have given up the job search process and left the workforce. These trends certainly seem sufficient to create fear and consternation among citizens, especially as they appear to have come rapidly and through no apparent fault of individual choices. To make matters still worse, many economists have noted, some workers may never regain employment following this recession. In any case, unemployment in its aftermath remains historically high.

But none of these concerns hold true for the nation’s wealthiest, or for the earnings of those financial institutions widely held responsible for playing leading roles in creating the recent recession. For that top income group and those organizations, earnings and wealth have risen sharply in the last two years. Few would argue with the view the nation needs healthy banks and well-capitalized investors and financial institutions, but this situation is nonetheless richly ironic. Most analysts agree the roots of the nation’s recent financial crisis may be traced to deregulation of the banking and financial industry and the excesses that such steps made feasible and possible for those institutions. While government officials surely supported deregulation, they did so at the behest of vigorous and massive lobbying by banks, and on the view pressed often and visibly by leaders of those corporations that “freer” markets and a larger share of space in the political economy devoted to market institutions could only benefit Americans by creating new sources of capital and employment. In fact, instead, if Morris and others are correct, the ironic result of broad-scale financial deregulation was market excess, a nation of indebted citizens and decreased opportunity for social mobility among the children of millions of middle and working class families. This legacy is more than lamentable. It represents a national shame.

It is understandable in these conditions that many citizens are angry and looking for someone or something to blame for their difficult predicaments. What is harder to fathom is why so many would blame government for their woes when their situation was created both by their own embrace of elected leaders pressing the putatively positive roles of virtually unfettered markets and the frequent unadulterated greed of those who most vigorously sought “to get government off their backs.” In short, it seems odd for voters to blame the government when they collectively elected public leaders who vigorously propounded an ideology of “less government” and privatized governance that yielded the results they now lament. And, again and in any case, government officials took such actions concerning banking and financial institutions only after strong and sustained lobbying efforts by the financial industry. So, the puzzle seems to be why so many Americans would blame their government for creating a situation that arose from banking industry actions and their own actions.

The answer is not clear, but may lie partially in the same conflicted tangle of voter sentiments that fostered reckless deregulation and toleration of financial excess in the first place. U.S. citizens have at once distrusted government, placed enormous demands on it and sought to make it more “efficient” by making it operate more like a “business;” that is, more market-like. The result of such steps most often has been diffused accountability, increased complexity and longer implementation chains to secure effective public action. In such a climate, it can be more than difficult to trace causes and consequences, a situation that compounds fears already afoot that “those guys in government cannot get anything right.” Such surely misses the point, but understanding that fact may not matter so long as voters choose to lash out at government as a convenient scapegoat, rather than reflect on their own choices and values or debate and rethink their assumptions concerning the appropriate roles for democratic politics and the market in the broader political economy. Simply reacting blindly in fear and anger will do little to address this fundamental concern, but it remains an open question whether the nation is any longer equipped to engage in the dialogue and to make the choices necessary to define an alternate course. Sobering decisions lie ahead. It is not now clear whether they will be made amidst vigorous and informed debate or out of fear and scapegoating of a misplaced target of ire.