Looking for the Keys in the Wrong Place

poorhouse

I am back to reading the news and opinion, seeking inspiration for these blog posts. Today it comes as it often does from an op-ed by David Brooks, entitled, “This Century Is Broken.”

Most of us came of age in the last half of the 20th century and had our perceptions of “normal” formed in that era. It was, all things considered, an unusually happy period. No world wars, no Great Depressions, fewer civil wars, fewer plagues.

It’s looking like we’re not going to get to enjoy one of those times again. The 21st century is looking much nastier and bumpier: rising ethnic nationalism, falling faith in democracy, a dissolving world order.…At the bottom of all this, perhaps, is declining economic growth. (Emphasis added)

Brooks continues with some statistics on the number of people without jobs, including a large number who have stopped looking. Pretty shocking. Then some data on the number of the poor that are using some form of drugs. Pretty grim outlook.

About half of the men who have dropped out take pain medication on a daily basis. A survey in Ohio found that over one three-month period, 11 percent of Ohioans were prescribed opiates. One in eight American men now has a felony conviction on his record.…In different ways Eberstadt and Cowen are describing a country that is decelerating, detaching, losing hope, getting sadder. Economic slowdown, social disaffection and risk aversion reinforce one another.

Of course nothing is foreordained. But where is the social movement that is thinking about the fundamentals of this century’s bad start and envisions an alternate path? Who has a compelling plan to boost economic growth? If Trump is not the answer, what is?

Wrong question. Economic growth is the problem, not the solution. Economic growth has put many of the disaffected in the straits they are now in. Brooks should be, instead, following the money as “Deep Throat” is supposed to have said back in the Watergate days. I have to admit I lack proper statistics for what follows, but I think I am correct overall. I believe that a better analysis should be based on the distribution of income. GDP per capita has been rising steadily for the last 50 years with a few bumps along the way. This means on average, every one in the US would have had more dollars to spend every year. The graph plots GDP per capita (constant 2005 US$) vs. year. (Source: Index Mundi)

Screen Shot 2017-02-22 at 3.35.57 PM.png

I also looked at similar data corrected for purchasing power. The same upward trend indicated that even if prices increased, the average person would have had more to spend. Without going to the work of Thomas Piketty and other economists, it seems very clear that more is not better. The problem lies in where the money goes, and for that, you need another economic statistic, the Gini coefficient, that indicates the way the money is distributed. Higher numbers indicate that more of the money is going to the wealthier. This graph plots Gini vs. year (Source: Index Mundi)

Screen Shot 2017-02-22 at 3.54.18 PM.png

US Gini coefficients have been increasing for a while. So while the US keeps getting richer overall, the lower economic classes are getting less of the wealth. That’s the basic problem, not growth. But that’s not all. We are significantly more distorted than the countries we tend to compare ourselves to. The bottom cluster includes the UK, Sweden, France, India, and Greece. The middle cluster is China, Russia, and the US. The upper two are Guatemala and Haiti. I did not have any particular set of counties in mind when I constructed this chart, but I find the closeness of the US to both Russia and China, particularly intriguing. Perhaps we should stop pointing fingers at them.

Then for fun, I went to the Freedom House website where I could gather data on the most authoritarian and undemocratic countries of the world and plotted the Gini coefficient just as in the above graph. I won’t include the figure, but the US is again clustered in with many of these baddies. It seems to me that the time has come to, as Shakespeare wrote for lawyers, start killing the economists.

To add fuel to the fire, the number of billionaires is rising far faster than global GDP. A story in the NY Times noted, “[t]here were 2,473 billionaires in the world, as of Wealth-X’s last count through 2015. That was a 6.4 percent increase in billionaires from the year before. Global GDP currently is rising from about 2 to 3 percent per year. Further, “The top 10 — nine from the United States, one from Spain — have a combined net worth of $582 billion.” I can’t do the math, but wonder what the Gini coefficient would be if this money were to be spread around the bottom end of the economic spectrum? More critically, what kind of lives would all those disaffected be able to live?

This raises many, many questions for me, and I hope for you. Are we looking in the wrong place for answers to the social decay we are falling into? I think so. Economics has no solution. Neither does technology or innovation. The current shift toward authoritarianism and populism is, if we are like so many other nations where wealth is controlled by oligarchs, only to make things worse or, at best, maintain the current conditions. All the promises President Trump has made fly in the face of these data and other economic models that are equally as unpromising for the poor. How terribly cruel this is. We have started to use that word to describe the current immigrant actions, but really should begin to see the inherent cruelty across the board.

Most arguments related to this situation are couched in terms of fairness. We need policies that are fair because we believe in justice. That language is going nowhere in dealing with this issue. It’s too easy to subvert fairness, but maybe it is time to expose the inherent cruelty behind what appear to be the principle drivers of this new President and his men (sic).

(Image: Gustave Doré, Wentworth Street, Whitechapel: 1872)

|