At some point during the past decade I came to the conclusion that the single most important economic, political, and social problem we face is growing inequality. The problem it supplanted, preeminent in the 2000s, was war: in particular, the use of armed force to impose a"world order" that was short-sighted and injust. Needless to say, that problem is still with us, but it's faded a bit as all those wars have turned into futile quagmires. Before that, in the relative normalcy of the 1990s, we had the luxury of worrying about more chronic problems, like the long-term effects of anthropogenic climate change and future limits on natural resources -- problems we still face, of course. One could even make a case that all three of these big problems are related: on all three politicians, at least in the US, tend to split the same ways, even though one can construct sound arguments why conservatives should be wary of war and environmental disaster.
On the other hand, the very definition of conservatism -- the political ideology devoted to the preservation of the social order as dominated by whoever is richest at any given time (at various times: the landed aristocracy, slaveholders, merchants, industrialists, financiers) -- both assumes and promotes inequality.
Most conservative arguments reduce to a simple pattern: if we let X happen, we'll start down the slippery slope to communism, socialism, or some such terminal condition -- most of which actually define their goal as a fairer and more equitable society. Which is to say: once you get past the scare words you wind up debating the real question. David Brooks, of course, has no desire to argue that vast inequality is the just order of society and the masses should just buckle under and get used to their lot. As someone practiced in the art of arguing against people's better interests and nobler desires he seeks to obfuscate and confuse the issue, then blame it on someone else, then propose fixes that wouldn't work in the very unlikely event that they were ever tried.
I'm going to do something I haven't done before and quote Brooks' column, The Inequality Problem, in its entirety, stopping every paragraph or so to make some observations.
Suddenly the whole world is talking about income inequality. But, as this debate goes on, it is beginning to look as though the thing is being misconceived. The income inequality debate is confusing matters more than clarifying them, and it is leading us off in unhelpful directions.
What Brooks means is that "suddenly" people like the US President and the elites at Davos are talking about inequality -- people Brooks takes seriously, people of his world. Needless to say, those people, like Brooks, have been a little slow on the uptake. Income inequality has been around forever, but it was considered less of a problem up to about 1980 because incomes from the 1930s into the 1970s, at least in the US, had been trending toward less inequality, and the purchasing power of most incomes had been increasing. Poverty among the elderly, for instance, was largely eliminated by Social Security, introduced in the late 1930s, and the socalled "war on poverty" programs started in the late 1960s at least initially -- until conservatives like Donald Rumsfeld started running those programs -- reduced residual poverty.
From 1980 on, coincident with the rise of conservatives with the Reagan administration, income inequality grew, and by the end of the 1980s the trends were clearly documented. The most obvious case, much commented on at the time, was a shocking increase in CEO compensation relative to average wages. This was accompanied by a wave of leveraged buyouts, the result of lax regulation of financial institutions and the more general "greed is good" culture that the Reagan administration encouraged at every opportunity. Reagan's marginal tax cuts were one such signal. Another was his crushing of the air-traffic controllers union.
Brooks specifies income inequality rather than wealth inequality, which is much more extreme. Ferdinand Lundberg wrote a classic study of the accumulation of wealth in 1937, America's Sixty Families, then updated it, finding little changed, in 1968 as The Rich and the Super-Rich: A Study in the Power of Money Today. The list of billionaires Forbes celebrates each year has become a bit more volatile with new money made from high tech and financial scams, but the concentration of wealth has if anything become more extreme. And the division has become so extreme that in 2008 Occupy Wall Street popularized the notion that a line separates the top 1% from everyone else: that the underclass today is 99% of the population.
As for "confusing matters more than clarifying them," that, as you will see, is Brooks' mission, starting with the next line:
In the first place, to frame the issue as income inequality is to lump together different issues that are not especially related. What we call "inequality" is caused by two different constellations of problems.
At the top end, there is the growing wealth of the top 5 percent of workers. This is linked to things like perverse compensation schemes on Wall Street, assortative mating (highly educated people are more likely to marry each other and pass down their advantages to their children) and the superstar effect (in an Internet economy, a few superstars in each industry can reap global gains while the average performers cannot).
At the bottom end, there is a growing class of people stuck on the margins, generation after generation. This is caused by high dropout rates, the disappearance of low-skill jobs, breakdown in family structures and so on.
Brooks' first obfuscation is his expansion of the haves to the upper 5% of incomes from Occupy Wall Street's 1%. The threshold for the top 5% of incomes was $161,000 in 2012, versus $394,000 for the top 1%. Between 1% and 5% you get into well-paid professionals and small business owners -- well-to-do, for sure, but hardly filthy rich (unless they inherited it). But the real inequalities only grow in the top 1%, so much so that Paul Krugman has suggested we focus only on the top tenth, the 0.1%, where incomes start around $1.9 million and go way up from there. Emmanuel Saez has calculated that 95% of all the income growth since the "recovery" began in 2009 has been snapped up by the top 1%, and two-thirds of that by the top 0.1%.
The bottom 80-90% of Brooks' top 5% may indeed make their money the ways Brooks enumerates, but the very top have different means: with overvalued equity in corporations and/or through the financial transactions that overvalue that equity. (CEOs make most of their"compensation" through stock options, so they gain by this process both coming and going.) This results in a series of bubbles and busts, but as long as the political fundamentals remain strong -- as long as labor markets are too weak to claim a share of productivity gains, as long as antitrust enforcement is too weak to curtail monopoly, as long as regulation is weak and tax enforcement limited -- companies will prosper on paper, even if they wallow in debt, with the rich getting all that much richer.
Since 1980 incomes for the bottom 80% have remained stagnant, and since 2000 they have lost ground. Brooks, like all conservatives, wants to blame this on the "losers," as if, for instance, CEOs had nothing to do with "the disappearance of low-skill jobs." There is no doubt that getting more education and a stable marriage helps individuals to improve their lot, but it's pretty incredible to assert that an increase in dropouts and broken families since 1980 has reversed a trend toward greater income equality under liberal governments from 1933 to 1969 (or later if you're soft on Nixon -- something I can't quite stomach).
Nor is there any real shortage of unskilled jobs these days. They are less likely to be in manufacturing or agriculture, and more likely to be in services, but what distinguishes them isn't the skill level: it's the pay. And wage levels are down almost exclusively due to political pressures. Raising the minimum wage -- a purely political act -- would help, and bringing back unions strong enough to negotiate with management would help even more.
If you have a primitive zero-sum mentality then you assume growing affluence for the rich must somehow be causing the immobility of the poor, but, in reality, the two sets of problems are different, and it does no good to lump them together and call them "inequality."
The economy is not necessarily a zero-sum game. Some businesses, for instance, actually make things that are worth more than the sum of their costs, and those businesses -- their workers, their skills and the technology they employ -- produce added wealth ultimately for the economy as a whole (although who benefits from that wealth depends on the relative power of workers and management, and that approximates a zero-sum game). Other businesses just redistribute goods, and this can also make them more valuable. But there are other businesses which just redistribute costs: they are zero-sum or worse, although they may pretend to add value by inflating assets, creating a bubble which appears profitable until it collapses. A typical example here is what private equity firms do: buy a company at an inflated price, paid for by burying the company in debt; sell off pieces, cut costs elsewhere, and pocket tax breaks; resell the company, preferably to a firm expecting to repeat the cycle. The real effect here isn't to build a productive company but to tear one down by stripping it of its value.
Many financial schemes wind up being cases of the rich screwing the rich -- the 2007 collapse exposed cases of banks knowingly selling worthless securities to supposedly cherished customers -- but there are ways ordinary folks get hit too: their "professionally managed" retirement funds are easy game; they put pressure on many companies to cut jobs and labor costs; they help form near-monopolies which help to drive up prices. And they support politicians who help them save on taxes and regulation, creating even more returns for their predatory practices.
Second, it leads to ineffective policy responses. If you think the problem is "income inequality," then the natural response is to increase incomes at the bottom, by raising the minimum wage.
But raising the minimum wage may not be an effective way to help those least well-off. Joseph J. Sabia of San Diego State University and Richard V. Burkhauser of Cornell looked at the effects of increases in the minimum wage between 2003 and 2007. Consistent with some other studies, they find no evidence that such raises had any effect on the poverty rates.
That's because raises in the minimum wage are not targeted at the right people. Only 11 percent of the workers affected by such an increase come from poor households. Nearly two-thirds of such workers are the second or third earners living in households at twice the poverty line or above.
There are two reasons for the minimum wage. One is that it sets a minimal social standard about the value of work within the context of human life. Basically, if a job isn't worth paying minimum wage for, it isn't something humans should have to do. Secondly, it puts a limit on the relative power of employers and employees. A nation which values its citizens will insist that they be paid decently. Conservatives hate the minimum wage because it limits the ability of employers to bully their employees, and because they generally regard employees as loser scum they feel entitled to abuse.
One can argue further that the minimum wage should be at least the minimum amount it takes for a single parent to support a family above the poverty level. There is no sense in which the current US minimum wage satisfies that requirement. One may fix that by raising the minimum wage, by raising a wage alternative like the earned income tax credit, by reducing the costs of living in other ways -- e.g., through subsidized housing, food, education, health care, etc. -- or by some combination of these. One should take note that subsidies for low-wage workers are effectively subsidies for low-wage employers, which may seem distasteful, but only through subsidies can one even out variable factors like number of dependents.
Like so many right-wing pundits, Brooks cheerfully cites studies with minimal attribution and qualification, with a high likelihood of having been churned out by conservative "think tanks" that are little more than ideological publicity firms. However, even if his data that most minimum wage workers are merely supplementing the incomes of non-poor families, that proves nothing more than that he doesn't understand my first paragraph here: that the minimum wage has to do with the dignity of work -- teenagers shouldn't have to work under abusive conditions even if their parents are adequately paid -- and that the minimum wage is a lower boundary condition: it should be set high enough so that no working person should be denied a decent standard of living (at least within a nation's means).
Also note that changing the minimum wage, even doubling or tripling it, would have virtually no effect on the broader question of equality. It is merely a lower boundary: it says a lot about a nation's sense of decency, but has virtually no power to change the median or balance the spread of the incomes above it.
The primary problem for the poor is not that they are getting paid too little for the hours they work. It is that they are not working full time or at all. Raising the minimum wage is popular politics; it is not effective policy.
It's hard to believe that even Brooks wrote that first line with a straight face. Recall that the current minimum wage is set well below what most families need to be self-sufficient and out of poverty. No doubt some suffer from not being able to get 40 hours of work a week, but some work considerable overtime (probably not paid as overtime, as it is scattered across multiple jobs) and are still not able to escape poverty. Brooks is trying to argue that the fix for their problem is to give them more hours of underpaid work. Clearly, by any standard of decency, they are not being paid enough for their work.
Third, the income inequality frame contributes to our tendency to simplify complex cultural, social, behavioral and economic problems into strictly economic problems.
There is a very strong correlation between single motherhood and low social mobility. There is a very strong correlation between high school dropout rates and low mobility. There is a strong correlation between the fraying of social fabric and low economic mobility. There is a strong correlation between de-industrialization and low social mobility. It is also true that many men, especially young men, are engaging in behaviors that damage their long-term earning prospects; much more than comparable women.
Sorry to interrupt Brooks before his big punch line, but there is a lot to slog through here. These correlations are all true to some not-very-important extent, but the net effect (and most likely the sole intent) of choosing them is to blame the poor for their poverty. To pick out a similar truism on the other side, there is a very strong correlation between inheriting a fortune and making lots of money. (I'd invite Brooks to re-run his examples on a sample of heirs, so we can get an idea of how pregnancy, divorce, dropping out, drug abuse, etc., have on people who start out with a thick cushion of money.)
And from a policy standpoint, I have to point out that a viable alternative to single motherhood is abortion, and that blocking that option both punishes women and adds a drag on the economy. That many people who drop out of high school aren't too dumb -- they just didn't fit in (I'm an example). De-industrialization may be a problem, but but it's hard to see it as a character flaw -- except perhaps of the MBA/CEO class. And I have to wonder whether "engaging in behaviors that damage their long-term earning prospects" isn't a cheap shot at the Army, which may have been a decent jobs program during times of peace but has been an unmitigated disaster the last 12 years.
Low income is the outcome of these interrelated problems, but it is not the problem. To say it is the problem is to confuse cause and effect. To say it is the problem is to give yourself a pass from exploring the complex and morally fraught social and cultural roots of the problem. It is to give yourself permission to ignore the parts that are uncomfortable to talk about but that are really the inescapable core of the thing.
Aside from his confusion about cause and effect, not to mention his inability to distinguish dependent from independent variables when running a correlation, Brooks' third and fourth sentences are truthy enough. But the uncomfortable part he's permitting himself to ignore is class. It's true that class and money aren't exactly the same thing, but they correlate quite well, especially if you start from the beginning. In every example Brooks has cited thus far, more money would make a world of difference -- that single mother could afford childcare, that dropout could find a more suitable education -- and even more so the nurturance of an upper class environment. So perhaps the policy argument should be more than just money.
Fourth, the income inequality frame needlessly polarizes the debate. There is a growing consensus that government should be doing more to help increase social mobility for the less affluent. Even conservative Republicans are signing on to this. The income inequality language introduces a class conflict element to this discussion.
Democrats often see low wages as both a human capital problem and a problem caused by unequal economic power. Republicans are more likely to see them just as a human capital problem. If we're going to pass bipartisan legislation, we're going to have to start with the human capital piece, where there is some agreement, not the class conflict piece, where there is none.
So much here we have to first turn it inside out to make any sense of it. Brooks asserts that we can only implement policy on a bipartisan basis, which gives the Republicans dictatorial control over policy, since they won't agree to any policy but their own. But the Republicans are a minority in Washington now, and are likely to become even more so if voters ever manage to figure out how much they are personally hurt by the party's slovenly allegiance to the 1%. So the first thing Brooks is trying to do here is to steer Democrats away from talking about the issue -- even as "the income inequality frame" but most of all, heaven forbid, as class.
Secondly, he's claiming that Republicans would be happy to do something about "the human capital piece" -- an obnoxious term for working people, reduced to the most miniscule cogs in machinery controlled by money. However, I haven't seen the slightest evidence of any such interest among Republicans -- not since George W. Bush conned Teddy Kennedy into his Trojan horse "No Child Left Behind" law, which did more damage to the public education system it claimed to be saving than would have happened had nothing passed. And that's now regarded as one of Bush's "big government" heresies, something no one in the party defends any more. Rather, all the Republicans seem to care about is cutting taxes, completely undermining safety net spending -- cf. their recent moves on unemployment compensation and food stamps -- and letting businesses run amok with fraud.
Some on the left have always tried to introduce a more class-conscious style of politics. These efforts never pan out. America has always done better, liberals have always done better, when we are all focused on opportunity and mobility, not inequality, on individual and family aspiration, not class-consciousness.
Brooks reaches a bit in his reading of the Democrats, but at least he acknowledges the notion that low wages are indeed "a problem caused by unequal economic power." Still, he misses an important linkage. The"human capital" he's so fond of -- education, although there's really more to it than that -- is only a means for individuals to move up the class hierarchy. Equalizing economic power, on the other hand, is the way to move an entire class to a higher standard of living -- promoting unions is one way to do it, using the government is another. (And, for what it's worth, I'm very fond of the idea of worker-owned companies, which is a private sector solution that moves beyond the conflicts inherent in union-management negotiations.)
Brooks, like most pro-business Americans, likes the idea of equal opportunity and eased mobility, because they leave the class structure and its attendant inequality intact -- they just shuffle the players. Clinton and Obama are in fact good examples of poor boys who worked their way up through the system -- by being very smart, of course, and working very hard, but also because they had unique talents for sucking up to the rich and powerful. They are, or should be, prime examples of the fabled American dream, but rank-and-file Republicans simply loathe them, and their rise coincides with the most ambitious attempt ever to close the American system: to make higher education inaccessible and unaffordable except to the upper crust; to dumb down lower education; to exempt inherited wealth and proprietors and push the tax burden down on the working class, who take home ever less for their toils; to shut down the nation's borders; and to manage the losers through a complex system of jails, courts, and parole, making sure they can't vote.
If we're going to mobilize a policy revolution, we should focus on the real concrete issues: bad schools, no jobs for young men, broken families, neighborhoods without mediating institutions. We should not be focusing on a secondary issue and a statistical byproduct.
Again, Brooks has no clue as to what causes what. Increasing inequality is the thread that runs through dozens of problems. It has multiple causes, some endemic to capitalism, but many of them are purely political. And even those that are endemic may be limited and rendered reasonably safe by political means, once we have the desire and clear thinking to do so. It's been difficult to mount a serious political movement around such a basic problem. I put a lot of the blame on the Cold War, with so much ideological and propaganda investment in demonizing communism and in whitewashing capitalism. Pace Brooks, before WWII large numbers of Americans intuitively responded to populist political campaigns, and if they failed to achieve power, it was usually because liberal reforms blunted the people's direst complaints -- the New Deal being a prime example.
I won't try to prove this here, but there must be much better ways to express the truths that surround the boring statistics documenting increasing inequality. When that happens you'll start to see some real movement on this issue. It is, after all, a profound issue, at the very heart of the left-right divide. Our lives, our survival, hang in the balance.
Even though the column only ran in Wichita today, turns out I'm late to the bonfire. Here are some more links on Brooks:
Eric Alterman: David Brooks Shows His Hand on 'Inequality':"Brooks, like other conservative commentators, seeks to evade the fundamental facts of economic inequality by shifting the ground to cultural, social and 'behavioral' terrain."
Dean Baker: David Brooks' Primitive Defense of the Rich: "David Brooks is sweating hard trying to defend the one percent against the rest of the country and reality."
Josh Barro: David Brooks Is Wrong About Inequality: "David Brooks has a column about inequality today and it's wrong. But it's wrong in a way that helps explain why conservatives have no idea how to talk about inequality."
Matt Bruening: David Brooks' Problem Understanding Inequality:"Brooks points out that because Republicans do not want to do anything to fix inequality, talking about it is just not a good idea politically."
Hannah Groch-Begley: David Brooks Blames Single Mothers for Their Poverty:"Media figures who insist that single mothers are to blame for their own poverty ignore these economic realities, and distract from the conversation we should be having: that all families, regardless of structure, need access to basic social goods like equal pay, family planning, and childcare; benefits which economists have shown would improve the economy and reduce poverty for everyone."
Robert Kuttner: David Brooks's Worst Column Ever: "Alert readers may recall that a few weeks ago, I wrote a piece about Tom Friedman's worst column ever, plugging efforts by a billionaire hedge fund friend to persuade college students that their enemy was Social Security. Now, Friedman's colleague David Brooks has written an even worse column. It's really hard to determine Brooks' worst column ever, since he seems to turn out one every week."
Robert Reich: David Brooks' Utter Ignorance About Inequality:"Occasionally David Brooks, who personifies the oxymoron 'conservative thinker' better than anyone I know, displays such profound ignorance that a rejoinder is necessary lest his illogic permanently pollute public debate."
Wonkette: Millionaire NYT Columnist David Brooks: Poor People Won't Be Poor if They Just Act Like Rich People: "See, when bankers get paid 'perverse' amount of money, that money isn't coming from poor people. It's coming from thin air." And: "Yes, do not take from the rich and give to the poor. This, says the guy who gets a six figure salary to write a shitty column filled with lies every week, would be misguided and would not help them. You would think that giving poor people more money helps them have more money, but that is 'primitive' thinking on your part because the real problem is that Poors do not act like Rich people."
Jordan Weissman: What David Brooks Doesn't Get About the Minimum Wage:"According to David Brooks, the problem with income inequality is mostly just that liberals won't stop gabbing about it. Class consciousness, he writes in his Times column today, is bad for political compromise and bad for America." Also goes into the study cited by Brooks, which turns out not to say what he says it says.
l Matthew Yglesias: David Brooks Invents "Growing Consensus" to Help the Poor: "In a curious column today, David Brooks asserted that Republican Party politicians are deeply concerned about the welfare of poor Americans and that if liberals would just stop being mean to rich people the country could come together and help the poor."
Phil DeMuth: Are You Rich Enough? The Terrible Tragedy of Income Inequality Among the 1%: not on Brooks, but points out how much separates the top from the bottom of the top 1%.
Yves Smith: David Brooks on Income Inequality: Actually, a comment on a 2007 Brooks column, so maybe he had heard something about inequality before last week:
The pronounced shift in income and wealth concentration in recent years, for example, can't be explained simply by those with natural advantages (read smarter, harder working, better educated) doing better. Favorable tax law changes and a rising tide of liquidity (which have kept asset prices high, favoring capital owners over labor sellers) have played a big role as well. And while the public at large may not understand how the rich have gotten so much richer, they can see that the people at the top increasingly live in castle-like homes, fly on private jets, buy mega yachts, in short, enjoy a standard of living unheard of even a generation ago, while their incomes have been largely stagnant, and many work harder than before (for example, there are fewer stay-at-home moms that there were 20 years ago because most families need the second income). Visibly unfair results undermine popular support for limited regulation and income transfers. But many at the top have lost their sense of noblesse oblige, so if there is a backlash, they have no one to blame but themselves.
Martin Longman: Fighting in a Defensive Crouch: This suggests that at least some Democrats (like the dude in the White House) are throwing in the towel and reconstructing their arguments along Brooksian lines, emphasizing opportunity and mobility and playing down inequality and anything with a whiff of "class warfare." Longman objects: "That's fighting on the Republicans' turf using the language of Frank Luntz. When the day comes that the president calls for rich people's heads on pikes, then he'll be divisive. Until that time, he's merely pointing out that the wealth disparity in this country has grown to an historic level, and something ought to be done about it."