A Society of Unequal Possibilities?

At the dawn of American democracy, its first well-known bard and biographer, French aristocrat Alexis de Tocqueville, examined “why democratic nations show a more ardent and enduring love of equality than of liberty.” Class society was, by definition, unequal, and in democratic societies equality becomes a fetish, he pointed out, coming to the sad conclusion that “they want equality in freedom and, if they cannot have it, they want it in slavery.”

Since then, freedom and equality have remained the cornerstones of all ideology in the United States. Of course, we mean equality in the formal sense — equality under the law and equality of opportunities — but also equality that allows any native-born American to take on the role of, for example, the founder of a new business empire, like Bill Gates of Microsoft or Sergey Brin of Google, or even the country’s president, in the manner of Barack Obama. At the bare minimum, of course, parents hope that the “American dream” will manifest, if not for themselves, then for their children.

These days, however, this dream seems all the more elusive. During the course of the recent pre-election campaign, disappointed voters did not once talk about this dream face-to-face with the very same Obama.

Among these reasons is the quick and steady growth of income inequality in the country. The New York Times economic commentator and Nobel laureate Paul Krugman calls this the “Great Divergence” of American society. It began 30 years ago, but its repercussions became especially palpable in the wake of the financial crisis of recent years.

In an attempt to explain the reasons for this divergence, a seminar titled “The United States of Inequality” was recently held in Washington. Slate reporter Timothy Noah presented the conclusions on this topic, during the course of which he spoke with Krugman and other leading specialists.

In conclusion, it became clear that before the crisis in 2007, around 24 percent of all income in the United States flowed to the top 1 percent of richest Americans. Now approximately 34 percent of all assets in the country belong to them. They pocketed more than 80 percent of the total increase in national income from 1980 to 2005. This growth was attained by an increase in productivity, but it is barely reflected in the pay of low and middle-income workers.

Noah asserts that the steady growth of wealth inequality in the U.S. has existed since the beginning of the last century. Thereafter, wealth inequality reached a peak just before the stock market crash of 1929 and the beginning of the Great Depression.

Having examined about a dozen different factors, Noah came to the conclusion that on this issue, race and gender discrimination are not factors. Women in the U.S. are steadily catching up to men’s income levels, and African Americans, if they are not catching up to their white compatriots, are in any case stronger than before and not losing ground.

“None,” the author admitted in response to the impact of modern computer technology on the correlation of incomes between the rich and poor in America. Referring to authoritative specialists, he denied the “imagined uniqueness” of computers as a life-transforming factor and recalled that electricity in its time spread faster, and the effects of its implementation were deeper.

In Noah’s opinion, the impact of immigration and fiscal politics on the divergence of wealth in American society is minimal. A bit weightier is international trade and globalization in general. He sees the main reasons for the deepening of inequality in the decline of the trade union movement in the U.S. and even more so in the deficiencies of the national education system, in the greed of speculators on Wall Street and in the management of American corporations.

It is especially in big business, especially in the financial sector, and also in the entertainment industry where, in his words, the majority of “stinking rich” Americans are active, whose yearly incomes constitute $7 million on average. They represent a negligibly small portion of the nation’s population — 0.1 percent, but 7.7 percent of the national income is deposited in their accounts.

Besides them, according to Noah’s classification, in the U.S. population there are the “sort of rich,” who earn $100,000 or more and make up 10 percent of the population, and the one percent of the “rich,” who earn $368,000 or more. Incidentally, according to research, the majority of the richest Americans today are not those who have inherited wealth, but those who have earned it.

During the “Golden Age” of the formation of the massive middle class in the U.S., there appears a period of the post-war boom during the 1950s and 1960s. Into the country’s economic history the boom entered as the “great compression,” inasmuch as increased prosperity was accompanied by a reduction of inequality. Its lessons are well-known: the tax rate for the top earners in the country exceeded 90 percent, power in the name of social peace consciously abated the appetites of big business and supported the assignment of social guarantees to workers. But Noah writes about all of this unsystematically, scattering it throughout various sections of his essay.

The beginning of the “great divergence” of society in the U.S. coincided with Republican President Ronald Reagan’s rise to power. Specifically, he severely lowered taxes on the rich (from 70 to 28 percent!), stopped the growth of minimum wage legislation, launched an attack on unions and weakened governmental regulation of the economy.

At that time the Cold War winner’s laurels forced even his compatriots to forget about all of this. But the triumph of his political and economic viewpoints seemed fleeting. Noah told me how he was stunned when he learned (from public information from the CIA) that his homeland “is starting to resemble a banana republic” with a higher level of income inequality than in Guyana, Nicaragua and Venezuela.

Even more unpleasant for him to discover was that America is lagging behind many other countries, from Germany and France to Canada and Australia, as well as lagging behind in the level of social mobility. This means that there is inequality not only of wealth, but also of possibilities.

Tom Woodruff, the middle-aged leader of one of the most powerful unions in the U.S., spoke on this topic at the seminar. According to him, the current socio-economic situation in the country is the worst in his lifetime. The crisis “wiped out” $17 trillion of national wealth. Thirty million Americans do not have a job or are only employed part-time. Every seventh family lives under the threat of losing its home. Every seventh resident in the U.S., and every fifth child, lives in poverty.

Meanwhile, Wall Street bankers who were rescued by the treasury during the crisis last year received a 17 percent increase in bonuses. The number of new millionaires increased by 16 percent. The highest earners were in the administrations of companies where the most massive layoffs had taken place.

But most of all, said Woodruff, his soul hurts from the fact that now for the first time in the country’s history, more than 50 percent of Americans think that their children will live worse than they did. “It’s always been part of the American dream that if you worked hard and played by the rules, your kids would have a better future,” said the union leader. “That hope has now been taken away.”