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WHAT’S WRONG WITH THE AVERAGE JOE
In September 2015 the scientific journal Proceedings of the National Academy of Sciences of the United States of America published a paper by two academics, Anne Case and Angus Deaton. It carried the less-than-riveting title “Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century.” Buried in its careful language was a shocking revelation. From 1999 there had been a marked increase in the deaths of middle-aged white Americans. Nothing quite like it had been seen in the industrialized world since the breakup of the Soviet Union in 1991 when an entire generation seemed to succumb to despair and vodka, and life expectancy fell alarmingly. How on earth could this be happening in America, a country whose economy had been growing at solid rates—at least until the 2008 financial crisis—for decades?
Shockingly, the rise was the result of what the authors called “deaths of despair”—specifically suicides, drug and alcohol poisonings and chronic liver disease and cirrhosis. Up until 1999 deaths among white midlife Americans aged between forty-five and fifty-four had been falling at about 2 percent a year, in line with declines in other wealthy countries, but in that year this trend abruptly stopped and went into reverse.
The paper contained a striking graph in which deaths per 100,000 middle-aged white Americans were plotted against those of Australia, Canada, France, Germany, the UK, and Sweden. In all cases death rates in other countries continued to decline at pre-1999 levels. Death rates of Hispanic Americans and African Americans (not shown on the chart) also fell in line with international norms.1 But those of white Americans did not: in fact, they started edging upward. That reversed decades of progress and was not happening in any other wealthy country. It added up to silent carnage. If mortality among white middle-aged Americans had continued falling at the trend rate, no fewer than half a million deaths would have been avoided between 1999 and 2013. Put another way, the phenomenon of “deaths of despair” in a previously privileged part of the population was similar in scale to the AIDS epidemic that had ravaged America for much of the 1980s and 1990s. What on earth was going on?
Figure 1
All-cause mortality, ages 45 to 54 for US white non-Hispanics (USW), US Hispanics (USH), and six comparison countries: France (FRA), Germany (GER), the United Kingdom (UK), Canada (CAN), Australia (AUS), and Sweden (SWE).
Before we seek to answer that question, there are two broader points. One is that, whatever was happening, none of it was showing up in the usual economic statistics. In 2015, fifteen years after the reversal in mortality started happening, the economy was growing reasonably well. Notwithstanding the 2008 financial crisis, the size of America’s economy had ballooned from $10.3 trillion in 2000 to $18 trillion in 2015, a gain of 80 percent.2 Even adjusting for inflation, it had grown 30 percent.3 If you went back forty-five years to 1970, the US economy was now three and a half times bigger, even adjusting for inflation.4 The irony was that many Americans, particularly blue-collar workers, were harking back to the 1970s as a sort of golden age when jobs were good and prospects of a middle-class life decent. It might be stating the obvious to say that raw growth statistics cannot capture intangible feelings, such as the loss of community, job security, well-being, or even identity, but if that is the case, why have we made economic growth—measured by GDP—a proxy for what we are supposed to value in life? Somewhere hidden in the narrative of growth and increasing prosperity lurked something very troubling.
The second point concerns averages and aggregation. The trick of the Case–Deaton study was to disaggregate the numbers, here by age, race, and class. In doing so, subterranean trends obscured by headline numbers and averages were suddenly revealed. The average American was living a longer and healthier life, but a subsection had suffered a reversal in fortunes. Why? The explosion of opioid use, including of prescription drugs such as Oxycontin, was one strong factor. Not only did that explain direct deaths from overdoses, but the underlying pain, physical or mental, that made the growing use of opioids such a problem in the first place also helped explain higher suicides and alcoholism. Opioids were most likely a symptom, not the underlying cause.
Digging deeper, it seemed much of the rise in deaths and sickness was affecting people without a college education. Failure to reach university was somehow becoming a death sentence. In 1970 low-income middle-aged men had an average life expectancy five years below that of high-income men of the same generation. By 1990 that gap had widened to twelve years. Now it is more like fifteen. As one commentator put it, “Dying half a generation sooner than you might have is bad enough. Expecting to die younger than your parents is worse. It goes against what Westerners in general, and Americans in particular, have taken for granted.”5
Growing inequality explained some of what was going on. Median wages had more or less stagnated since the 1970s, partly due to a loss of bargaining power by unions, a trend that has been replicated in most of the industrial world as the tenets of free-market capitalism encouraged a race to the bottom. In the US the share of economic output going to wages has been falling steadily for decades, with more going to corporate profits and capital. That exacerbates inequalities and penalizes people who have to work for a living, particularly those with skills that can be outsourced, mechanized, or computerized. Many of the best blue-collar jobs came with health benefits and on-the-job training, but some of those jobs have gone to China, southeast Asia, India, or Mexico. More still are being done by robots or strings of computer code. In wealthy countries the share of national income paid to workers fell from around 55 percent in 1970 to below 50 percent at the height of the 2007 financial bubble.6 An expanding economy has not, in other words, primarily benefited the workers who produced all that growth, but rather the owners of capital. “There really is a decline of the American working class,” Deaton said. “It reached its heyday with the ‘blue-collar aristocrats’ of the early 1970s with good union jobs, a job where you got…a promotion every year and you built a middle-class life for yourself and your family.”7 Without a decent job, a person’s chance of finding a stable partner falls, and the risk of drug addiction, alcoholism, depression, and suicide rises.
The paper caused huge interest. The authors were accused by some of ignoring African Americans, whose rates of mortality were still far higher than white Americans, even though they were closing the gap as a result of the reversal in white fortunes. But it was the findings about the decline of the white middle class that chimed so well with the 2016 presidential election in which Donald Trump was swept to power. As the Washington Post pointed out, “President Trump won huge swaths of voters in 2016 by promising to address the grievances of the white working class, and white nationalists endorsed his campaign. Case and Deaton’s research on white mortality seemed to speak directly to that political narrative.”8
In 1964, according to a 2014 Pew Research Center report, the average hourly wage for non-management, private-sector workers in America was $2.50, an amount that had risen to $20.67 by 2014. That sounds great until you take inflation into account. In constant 2014 dollars the average hourly wage in 1964 was $19.18. Half a century of toil, all that growth and technological advance later—and all you’ve got to show for it is a lousy $1.50. “In real terms the average wage peaked more than forty years ago,” the report said. One explanation is increasing benefit costs, particularly of employer-provided health insurance. If employers have to pay more and more for health costs, they tend to compensate by bearing down on wages.9
Certainly, many Americans are feeling the pinch. In the Pew survey 56 percent of respondents said their family’s income was falling behind the cost of living, against 44 percent in September 2007. In other words, even when the economy was binging on credit in the run-up to the Lehman shock, more than four in ten Americans felt they were barely surviving. The recession that followed exacerbated the trend. In 2000, 33 percen
t of Americans described themselves as “working class,” according to Gallup. By 2015 that number had risen to 48 percent. “Far from dying out, the working class now accounts for almost half of America by people’s self-perception,” wrote one author. “In some respects these measures are more revealing than statistics on median income, or income inequality. They express a feeling about being shut out from the benefits of growth. It is a very un-American state of mind.”10
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Inequality is not always bad. Progress depends on it since society never moves in lockstep. If you accept that, the only alternative to inequality is stagnation. In The Great Escape, a 1963 movie about the Second World War starring Steve McQueen, prisoners of war escape from a Nazi camp after secretly digging a tunnel. The escapees are indubitably better off than the prisoners left behind. Would it have been better if everyone had remained in the camp until the end of the war, or should we celebrate the fact that some people escaped first?11
That metaphor can be applied to almost any situation in which some people get an early advantage. Between 1550 and 1750 life expectancy in Britain showed no improvement. Nor, interestingly, did kings and dukes live any longer than peasants. Then something happened: the royal family gained access to an early smallpox vaccination brought from Turkey. Because of this and other medical advances, which spread from the court to the aristocracy, the wealthy in Britain opened up a twenty-year gap in life expectancy over the poor. It was unfair. The advantage was based on inherited wealth and privilege. But it was progress. In the end, vaccinations became widespread, bringing benefit not only to all the people of Britain, but also to people throughout the world.12
You could call this good inequality—a mechanism of progress, albeit an unfair one. But what about bad inequality? Imagine a dinner date in New York followed by a night at the opera.13 To arrive on time, you have to get through the Lincoln Tunnel. The tunnel has two lanes, but you’re not allowed to change from one to the other. Suddenly there’s a traffic snarl-up. Both lanes stop moving. Time ticks away. There is a serious chance you’ll miss dinner. More time passes. Now those opera tickets might turn into worthless bits of paper. When the lane next to you starts moving, you think to yourself, Terrific. Soon we’ll be moving too. But your lane doesn’t move and that hope slowly turns to anger as you watch cars in the next lane speeding along. Suddenly all you can think is how unfair life is, how the system is stacked against you. Before you know it, you’re breaking the law, cutting into the other lane. This is bad inequality.
In America people have historically been quite tolerant of inequality. The attitude has been, Good luck to them. It shows we can do it too. But that is changing. If other people gain advantages by access to expensive education or inheritance or old boys’ networks, your goodwill toward the success of others turns to resentment. “If you’re white and working class in America, you’ve had no income gain for thirty years,” says Angus Deaton. “If everybody was getting no income gain and there was some good reason for it, a war or something, I think people would have no difficulty with it.” But there is no war and some people are forging way ahead. “When they see these bankers with their enormous salaries or the head of New York–Presbyterian hospital, who gets paid $3 million a year, they see that these guys are getting really rich, and the white working classes are getting nothing.”14
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The middle class is flourishing. These are not words you see often these days. But it is true. So long as, that is, you’re talking about the global middle class and not the middle class in the West—much of which has been treading water at best for decades. If you look at incomes globally, however, something not often done, you will see that those between the 45th and 65th percentiles (from the bottom) doubled their real incomes between 1988 and 2011. Many of these people were Chinese. Those between the 80th and 95th percentiles—the middle class of high-income countries—have seen real incomes stagnate.15 The global top 1 percent—which includes the top 12 percent of US earners—receives nearly 30 percent of all income and owns about 46 percent of all wealth.16
The story of modern inequality is complex. Inequality is rising within most countries, especially high-income ones, but on a global level, inequality between some nations is actually shrinking.17 At the very least, the gap between incomes in parts of Asia, on the one hand, and Western Europe, the US, and Australasia on the other, has narrowed, particularly since 2000. Much of that has occurred because of rapid industrialization in Asia, especially in China, and more recently, India. As growth in those two countries—which together account for nearly 40 percent of the world’s population—gathers steam, the income inequalities opened up by the West after the Industrial Revolution are gradually being narrowed. Where once there was a great divergence of standards of living in the nineteenth and much of the twentieth century, now there is a great convergence.
So the income benefit gained thanks to the accident of birth is beginning to fall.18 For humanists who support equality of opportunity regardless of nationality this is a wonderful thing. But if you’re living in the former industrial heartlands of Europe or America, it may not seem like anything worth celebrating. Today what you do is more important than where you do it. A corporate lawyer or microbiologist in New York, Shanghai, or Bangalore is likely to be doing very well. If your job in the West is making shoes or furniture you may not be able to compete with someone doing the same work in Bangladesh, Ethiopia, or the Philippines. One explanation for the rise of nationalism and the reaction against immigration on both sides of the Atlantic is that those who are doing poorly because of globalization are fighting for their “citizenship rent,” the advantage they once enjoyed by accident of birth.19
Since most politics is national and not global, it is the inequalities within countries, not between them, that have caused a political backlash around the world. Very high inequality is almost always unsustainable, especially in countries where this has not been the norm, and the story in almost all wealthy countries is one of increasing inequality, especially of wealth (as opposed to income). Or to put it in starker terms: the rich have been getting much richer while more or less everybody else has been falling behind. This is the uncomfortable reality lurking behind our narrative of endless growth. Whether Western liberalism can survive this jolt to the system is an open question.20
The rise in inequality preceded the global financial crisis by years if not decades. In 2008 the Organization for Economic Cooperation and Development, a club of the world’s richest thirty-five countries, found that in the previous two decades the gap between rich and poor had increased in three-quarters of OECD countries.21 In Canada, Finland, Germany, Italy, Norway, and America the gap had not only widened between the rich and the poor; it had also increased between the rich and the middle class.
Contrary to what most Americans are brought up to believe, social mobility is hard in the US. In fact, it is easier in socialist-leaning Nordic countries. (It is also relatively hard to move up in the world in the UK and Italy.)22 Generally, the more unequal a society, the harder it is to move, as the wealthy entrench their advantages through education, political lobbying, inheritance, connections, and so on. The so-called Great Gatsby curve shows that, as inequality increases, social mobility decreases.23 If you’re in the wrong lane of the Lincoln Tunnel, the OECD report shows, you’re likely to get stuck. “Greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve,” it says.
Inequality has increased for three main reasons, according to the OECD. Wages have risen for those people who were already well paid, especially bankers, professionals, and corporate executives; there are fewer jobs for less well-educated people, who have been dropping out of the jobs market in large numbers; and there are more single-parent families. Poverty among the elderly has fallen, but among young adults,
especially those with children, it has risen sharply.
Gradual recovery from financial crisis has done little or nothing to erode inequality. Normally, when economies recover, inequality falls as people find work, but this has been offset by a recovery in asset prices, which mainly benefits the better off. In the US in 2014 the bottom 10 percent of the population earned 1.6 percent of income, while the top 10 percent earned 29.2 percent. The same figures for Iceland, the most equal of OECD countries in that year, were 4.1 percent and 20.6 percent respectively. Put more starkly, in the US the top 10 percent earned more than eighteen times the bottom 10 percent. In Iceland the equivalent ratio was five times.24 In Britain it was 10.5 and in France 6.9.
What does all this have to do with economic growth? The answer is nothing at all. That’s the problem. The fact that an economy is growing tells you nothing about what is happening to the distribution of wealth. True, we cannot forget the lessons of the previous chapter, which are that quality improvements and technological advances could mean we are better off than we think.25 Still, the fact that someone has a better mobile phone or a more powerful form of painkiller in their pocket may come as small consolation if they feel they are falling behind financially. Although our countries are getting richer and our companies more efficient, we’re not creating more jobs, nor paying people more. Increased productivity has been decoupled from wages and employment.26 And if most people are not feeling any benefit, what precisely—and who precisely—is all this growth for?
The Growth Delusion Page 9