The New Republic

The divide started waaaayyyy before Bill, Marty. Income inequality has been growing steadily since the Nixon years. Bill did not magically reverse it on his own, but during the 90s, the gap slowed its widening. I'm confused as to why you're blaming Bill's (quite true) enchantment with the rich as to why their is troubling economic disparity in America.

- rozenson

February 20, 2008 at 2:00am

Most of the gazillionaires created in  the last two decades came from middle class families that did not have anything like the access and influence that come with membership in an elite. In fact, if you survey Silicon Valley's titans, you'll find that most of them are distinguished mainly by their cleverness, not their bloodline or family or other ties: Steve Jobs and Larry Ellison were both adopted into middle-class households; the Google boys were both children of middle-income, undistinguished academics; and the Khoslas and Groves and Bechtolsheims and Shrirams and Omidyars and Kordestanis and their ilk are of course immigrants.

So the notion of a "class divide" is BS, which is why the Class Divide Candidate flopped so pathetically, despite practically taking up residence in Iowa for years before the caucus. The REAL issue here is the increasing disconnect between the traditional American yankee ethos of work, saving and providing for the next generation and an American capitalism that depends on serial liquidity bubbles manufactured by the Fed. When your nation's prosperity depends on millions of negative net worth households buying stuff they don't need and can't afford, you've got a BIG problem. Not a class problem but a sustainability problem.

- teplukhin2you

February 20, 2008 at 7:52am

Marty, there has been one time in my life when 1) the gap between rich and poor wasn't *accellerating* (it has never shrunk) and 2) African-Americans advanced economically faster than the nation did (i.e., closed the gap).  Guess whose administration.

Tep, no disagreement on the sickness in our economy, but I respectfully disagree as to why "class divide" doesn't resonate: wealth has become so concentrated that the class divide is almost hidden.  Drive through a state like Kansas and you see a rough egalitarianism.  

Also, in my humble opinion, Edwards made a huge mistake by not taking up the immigration issue -- not in a mean Tancredo way, but in the economic sense -- i.e., there will be no universal health care or lower health care costs if we don't address our illegal immigration problem.  He could have rightly argued that the reason we made a dent in the African-American underclass during the 1990's was because of demand pressure on the low-skill end of the job sector and illegal immigration is fatal to that.  In a state like Iowa, that message would have resonated.  

- Lymon1

February 20, 2008 at 10:10am

Unfortunately, there has been a dramatic collapse in social mobility in the Anglo-Saxon economies in particular.

See: www.americanprogress.org/.../b1579981.html

Money quote - "Children born in the middle quintile (the 40-60th percentile of incomes in the country, $42,000 to $54,300) also have only a 1.8 percent chance of reaching the top five percent, a likelihood not much higher than in poor families."

If that study is too progressive for people then perhaps a report in the National Bureau of Economic Research in December 2005 would help.

Money quote - "the polarization between the super-rich and the poor is returning to early 20th century levels."

Another NBER report in 2006 called: "Understanding Mobility in America", showed that mobility is lower in the US than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among the major wealthy countries, only Britain has a lower rate of mobility than the US.

If those sources aren't to be trusted then maybe a study by the London School of Economics is admissable.

www.lse.ac.uk/.../LSE_SuttonTrust_report.htm

Money quote - "A careful comparison reveals that the USA and Britain are at the bottom with the lowest social mobility. Norway has the greatest social mobility, followed by Denmark, Sweden and Finland. Germany is around the middle of the two extremes, and Canada was found to be much more mobile than the UK."

Note that the countries with the highest social mobility are the "over regulated, high tax, inefficient, sick men of Europe". "Flexible" labour markets don't seem to equate to flexible social mobility. Not really surprising for people not blinded by ideology or jingoism.

What puts all of this into perspective is the opinion polls that consistently show Americans think social mobility is their greatest asset.

- The Ignorant Populist

February 20, 2008 at 1:03pm

Access to quality education is indeed a class issue, but wealth creation is not. With a few exceptions, this new economy is largely a winner-take-all crapshoot, not an oligarchy requiring access to power a la Halliburton. The "economic royalist" line doesn't cut it in this economy.

- teplukhin2you

February 20, 2008 at 1:16pm

Tep...I think you're missing the underlying issue about there being a class divide. As much as American's don't like to admit it, we're a classist society. Regardless of your race, once you reach a certain economic level, your economic interests trump racial/cultural interests and there is nothing wron g with that but to pretend it doesn't exist is denial. That the US has become class based has held true since the first "aristocratic " classes was created in the US after the American Revolution, Industrial Revolution, and post-Depression Era. A look at Kevin Phillips 'Wealth and Democracy' highlights the growing class divide between the upper percentiles of income and the lower and middle incomes levels that get squeezed, from singular pro-industry Federal policies to tax restructuring. This includes the last wave of silicon valley upstarts that will create the next generation of monied-families. Wealth creation and protection are indeed a result of class despite what we'd like to think. But there will always be those success stories of two cash-strapped Harvard drop-outs who build a soft-ware company into an international giant. Or the Harvard drop-out that creates the next Facebook. But then...those "success" stories aren't necessarily coming from your average state school these days. I have nothing against folks making money and doing what they can to insure it's still there for their grand children but not when it comes at the expense of everyone else.

America has  a harder time coming to grips with the idea that the social structure along income lines in America is very much class based because there is the ideal that we hold of being self-made folks of . It goes against the notion of the meritocracy we've come to believe in. The reason I bring up Phillips' book is that he is nether classist in his analysis nor ideological in his laying out of facts about how wealth has been created and protected in America since it's founding. Ironically enough, his chapters on previous super-powers (Spain, UK, Denmark) whose manufacturing based economies transformed into purely service, finance and speculative based economies in nature is very disturbing in light of the fact of the current economic crisis of our own economy and it's current state of being a service, speculative, & finance based.

Anyway, don't dismiss the issue of economic classism playing a part in how policies are created or the near negative growth in economic social mobility in the US. At least we have professional sports, shopping and reality TV to distract us from the realities of our country really works.

- singlespeed

February 20, 2008 at 3:40pm

I don't think the concept of "class", at least as I understand it, addresses the phenom that you and I agree is rampant here. Income inequality? hell, yes. But is there a new class that dominates our politics, our allocation of key resources, our intellectual life? I don't see it. How, exactly, do do Tiger Woods, Sergei Brin, Oprah Winfrey, Gates Buffett Schwartzman Kravitz et al dominate our political life? Who's their candidate? What policies do they share? Access to which vital sources of power do they control?

Case in point: someone pointed out not long ago that Gates's wealth is, realtive to the amount of capital market activity now occurring, a tiny fraction of a fraction of the relative wealth of the men he's often compared to, Morgan and Rockefeller. Morgan singlehandedly dominated the US capital markets. Gates' wealth doesn't even amount to the traded volume in one second-tier stock on ** one given market day **. And politically, Gates is invisible. As are Sergei and Larry and tiger and Oprah and Steve and Henry and....

I do agree that the decline in the quality of public primary and secondary education is an enormous problem. I would argue that that decline, along with changes to the tax code and the windfalls accruing to the winner-take-all people who have significant risk capital to invest in alternative asset classes not available to ordinary folks, that explains just about all of the rise in income disparity.

Also, there's a huge amount of distortion in any US statistics related to poverty because of the extraordinary increase, at a rate of 5 million every decade, in desperately poor third-world immigrants from Mexico and Central America. This problem, like the educational problem, is very specific, has very specific causes, and is susceptible to fixing if we adopt the right set of targeted measures.

Bottom line, we don't have a general "class" problem. We have some very specific problems that the current configuration of our political elites-- one in the grip of a reactionary schools bureacucracy, the other in hock to employers of sh*t-wage labor, and both desperate to appease the imported underclass that holds the balance of national political power-- refuses to address. No need to go all atmospheric on global on this. Just fix the schools, tax the hedgehogs at normal rates and repair our broken economic relationship with Mexico, and the gap between us and the Euros will shrink.

- teplukhin2you

February 20, 2008 at 4:18pm

Nouveau Rich vs.Old Money Teplukhin - does it really matter?

The end result is the same. The entire premise of low tax, "flexible", target obsessed, public/private initiative addicted (which really are a sale-of-the-century of public assets on the cheap) economies is that they destroy the old class privileges and enable a new world of individual choice and liberty. The evidence suggests that this is, in fact, a fantasy and a stunning propaganda victory for the Right.

This Game Theory ideology of human nature has now resulted in an unregulated, systemic corruption that increasingly threatens everybody, everywhere hooked into the global economy. The figures boggle the mind.

For anyone curious, you should check out Curtis's "The Trap"; a masterpiece from one of the finest documentary makers working today.

You can find the 3 minute intro here: www.youtube.com/watch

Enjoy.

- The Ignorant Populist

February 20, 2008 at 4:18pm

The Tiger Woods, Angolina's, or Oprahs - aka entertainment giants aren't moving resources across borders. Brin might not be pulling political levers yet, but the fact that his company is the dominate force in the internet doesn't preclude him from lobbying for future regulatory favors regarding internet issues if not already. Many of the early Silcon Valley fortunes are now old money that are well protected through extreme low-tax rate structures on capital gains and trusts set up specifically to protect non-earned wealth from taxation.

Giving poor immigrants a better secondary education isn't going to fix the income disparity that occurs between the average worker and say...Steve Jobs. Most of the movie stars who soap box for liberal ideas do so out of a false sense of altruism. I.e....if I do this people won't think of me as being a spoiled, out of touch rich person. Same goes for the t-shirt wearing, designer jean, low-brow millionaires. Because Bill Gate's income doesn't approach the second-tier stock trade value, it's who's invested in that stock. The majority of stocks are owned by that upper percentile of wealth holders - both new and old money folks.

Also the issues of including non-documented or recent immigrants into the census for income levels would down-trend the income disparity even more. Consider the fact that most of those won't give information to census workers out of INS fears (real or not.) But as you pointed out...the politicians are in hock to corporations that off-shore for cheap labor and incorporate off-shore to avoid further taxation, while family trusts are able to get a repeal of the "death tax" and capital gains taxes down to such levels that direct labor is essentially the only thing being taxed and over-taxed at that.

I'm not disagreeing that we don't have fundamental structural problems but implying that a better education for poor or lower middle class children will fix income disparities is somewhat disingenuous. Money begets money. The newer class of nouveau rich have come from upper middle class families so there is a leg-up so to speak. But to say that there isn't a class issue (derived from income disparities, trusts, etc.) reminds me of the CATO Institutes's argument that there really isn't a poverty issue in the US when you compare US poor to the poor in Kenya. The two are completely non-comparative when it comes to standards of living.

Irregardless of where you or I stand, I think we agree or can agree that the tax structure of the US w/ regards to fair taxation on non-earned income (trusts, capital gains, etc). Now if we could actually find it in our collective interests to invest real dollars into the primary and secondary education system of America. But I'm not holding my breath waiting for those tight-fisted Boomers fight taxes to improve schools for kids who aren't theirs any time soon.

- singlespeed

February 20, 2008 at 5:21pm

IggyPop - the distinction makes allthe difference in the world. Take San Francisco/Silicon Valley, for ex. We have lots of old money/trustfunders here, and lots of new money/entrepreneurs. Now tell me whether you can spot the difference between the following sets fo firms:

A) Hearst (newspapers/magazines), Bechtel (engineering), The Gap (retail), Schwab and FranklinTempleton (investments)

B) Oracle, Cisco, Google, Intel, eBay, Genentech, Yahoo!, Hewlett-Packard, Intuit, Sun Microsystems, Netflix...

Which group is providing more job opportunities for moderate-income people to build careers and raise families? Which group is contributing more to the local tax base? Which group is creating entirely new industry categories, seeding hundreds of other new firms and creating new opportunities and public and private revenues in communities around the world?

Do you really, seriously believe that "New Money" of the sort generated by the firms in category B is not vastly more beneficial than the rents generated by "Old Money" of the sort thrown off by category A?

- teplukhin2you

February 20, 2008 at 6:39pm

Brin et al have a bit of political influence in the categories in which they play, but that's as far as it goes. They're not kingmakers and don't set the tone or direction of our policy on anything except maybe capital gains taxes. They have NOTHING AT ALL like the influence that Carlos Slim has over Mexico's elite (how does a guy with no patents to his name and no investing prowess anywhere near Buffett's become the richest man in the world?), or that Berlusconi has in Italy, or that Russia's bandits in and outside the government have in their polity.

We have winner-take-all gazillionaires. We don't have oligarchs, and people know this. I think our arrows are better aimed at very precise targets that will actually make a huge and immediate difference to people's economic prospects, namely, fixing prim/secondary education and ending the importation of a second underclass when we haven't resolved the problems of our existing one.

- teplukhin2you

February 20, 2008 at 6:44pm

I honestly don't know if the Google, "Bridge to Freedom" has a greater impact on social progress than trust fund conspicuous consumption.

I suppose you could argue that "it's the future"; and the winner-takes-all society is the engine of technological progress; progress that consequently benefits the community (the community being defined as a majorty of humanity in-between arbitrary lines on a map.)

It's a theory, nothing more. It's also a theory with serious flaws.

Cohn's excellent work actually dispels this in the area of health care.

I think you miss the point Teplukhin. Not least because you are very close to that (seductive) Tomorrow's World.

As we both work in the private sector, I'll try and cut to the bottom line, which is this:

The whole point of the Anglo-Saxon economic model, with its emphasis on individual liberty, is that it promotes a more meteorritic society. This greater social mobility comes at the price of a smaller social state, and everything that entails.  

The reverse of this theory is that the European (Germanic) economic model actually reinforces class structure and curtails a flexible society, precisely because it wants to preserve greater security for it's (indigenous) working population.

To dumb it down to it's absolute false dichotomy it's: Risk and Reward vs. Stability and Equality.

It makes a comfortable theory but there's one problem.

The empirical evidence shows, quite clearly, that the reverse is true.

High tax, "inflexible" labour market economies, with a substantial public sector and regulatory environment, actually promote social mobility!

"Inflexible" economies = flexible societies.

- The Ignorant Populist

February 20, 2008 at 7:27pm

Which begs the question:

Why put up with the downside of a "flexible" economy...

(for downside read: less maternity leave, non-existent paternity leave, slave labour determined unemployment benefit, a shrinking union membership, less paid leave, less sick leave, higher health care costs, a commoditised third level education system with it's insane fees, etc, etc.)

...if it only promotes an inflexible society?

- The Ignorant Populist

February 20, 2008 at 7:37pm

Well, that's a strong argument, Iggy, and as you know I think we could learn a lot from the (non-UK) Europeans. That said, I think the German model is excessively rigid, as is the French, and would prefer to see more flexibility with more investment and provision/dafety net, as in the very successful Danish and Swedish and Irish models.

But you make a good case, am eager to hear more.

- teplukhin2you

February 20, 2008 at 8:47pm

Excellent point, IP!

- sleepyavl

February 21, 2008 at 1:45am