The Arc of Policy Is Long But Bends Toward Justice

But the current statistics are quite problematic. And not easily sloughed off.

I’ve read the journal, Foreign Affairs, off and on for more than thirty years. It’s neither Conservative nor Liberal—and also presents opposing perspectives. Sometimes the different perspectives are in the same journal, other times they appear over a few months. But they are inevitably written by an expert in the field, an academic, government official or a business expert. And here’s one on which every business person needs to do some reflecting.

The article to which I refer in the title, America’s Social Democratic Future, is by Lane Kenworthy, Professor of Sociology and Political Science at the University of Arizona. Kenworthy initially steps above the fray to look at the national policy over the past 100 years, demonstrating that the opponents of our unique, American-style social democracy are fighting a losing battle. But then he digs into the current problems we face. I’ve reread the article at least three times, not least because his economic, statistical interpretations are especially meaningful.

Here is his interpretation of three problematic issues we currently face.

First, the United ...

States does not ensure enough economic security for its citizens. Too many Americans have incomes so low that they struggle to make ends meet: among the 25 million households in the bottom fifth on the income ladder, average income is just $18,000 a year. Too many Americans experience sizable income declines: each year, about one in seven U.S. households suffers a drop in annual income of 25 percent or more. Too many Americans have no health insurance: even when Obamacare is fully implemented, between five and ten percent of U.S. citizens still won’t have coverage, a far higher share than in any other rich nation. Finally, too many Americans will soon reach retirement age with little savings and inadequate pensions: average household savings as a share of disposable household income fell from ten percent during the 1970s to just three percent during the first decade of this century, many employees with defined-contribution pension plans contribute very little to them or cash them in early, and the bursting of the housing bubble depleted the sole asset of many middle-class homeowners.

Second, the country is failing in its promise of equal opportunity. Most women and many African Americans now have a much better chance to obtain an advanced education and to thrive in the labor market than did their counterparts a generation ago. Yet the story for Americans who grow up poor is much less encouraging. Among affluent countries for which data are available, the United States has one of the lowest levels of intergenerational earnings mobility. An American born into a family in the bottom fifth of incomes between the mid-1960s and the mid-1980s has roughly a 30 percent chance of reaching the middle fifth or higher in adulthood, whereas an American born into the top fifth has an 80 percent chance of ending up in the middle fifth or higher. Moreover, recent decades have witnessed large increases in the gaps between the test scores and college completion rates of children from low-income families and those from high-income families, and the same will likely be true for their earnings and incomes when they reach adulthood.

Third, too few Americans have shared in the prosperity their country has enjoyed in recent decades. In a good society, those in the middle and at the bottom ought to benefit significantly from economic growth. When the country prospers, everyone should prosper. But since the 1970s, despite sustained growth in the economy, the incomes of households in the middle and below have risen very slowly compared with those at the top. According to calculations by the Congressional Budget Office that account for inflation, the average income for households in the top one percent soared from $350,000 in 1979 to $1.3 million in 2007. For the bottom 60 percent, the rise was quite modest: from $30,000 to $37,000.

Kenworthy’s nuanced interpretation explains these failures in terms of the global economy, business competition and shareholder demand for rapid appreciation in stock values. Even though the stock value expectations have been obvious for years, I’ve rarely seen any writer nail the issue.

His messy conclusion is that in the coming decades, more Americans will lose a job, work for long stretches without a pay increase, work part time or irregular hours, and go without an employer-backed pension plan or health insurance

An influential faction in Washington favors a different solution: shrink the federal government. According to this view, reducing taxes and government spending will improve efficiency, limit waste, and enhance incentives for investment, entrepreneurship, and hard work, leading to faster economic growth. But this approach is predicated on the false notion that the growth of government limits the growth of the private sector.

Another possible response to this state of affairs is to grin and bear it. In this view, there is little anyone can do to ameliorate the ill effects of the modern economy, so the wisest course of action for ordinary Americans is to adjust their expectations and carry on.

Kenworthy's ultimate conclusion is that we’re going to be paying a bigger price tag, but the payoff will be far bigger. And he’s got a load of examples and statistics supporting that. In the meantime we face some loony social science theories. Like Kenworthy, I believe they’ll be challenged and eventually go away. But in the meantime. . . .