American Inequalities and the Vote for the Right

Obama’s defeat is proof that America accepts the harshness of a new world. If inequalities are growing rapidly, it seems that for the moment, they are acceptable and have not hampered the vote for Republicans. It remains to be seen whether this new unequal model can last.

Through European eyes, America is heading for a bit of trouble. At a time when inequalities are becoming ever more widespread, and when current economic recovery has left half the population with stagnated or lower incomes, the U.S. votes conservative. The American population has penalized Barack Obama for wanting to introduce left-leaning laws on health, immigration, weapons and pollution. The president certainly has many personal faults that explain, in part, the dissatisfaction toward him, but nevertheless, the Republican victory is a humiliating blow to what Europeans defend as solidarity.

An analysis of the votes shows some surprising contrasts. At the same time that they punish a “left-leaning” president, Americans have approved, through concurrent referendums, large increases in the minimum wage including in Republican strongholds, the legalization of the sale of cannabis, a ban on shale gas in Denton, and a soda tax in Berkeley. The explanation that there has been a radicalization of the electorate as much to the right as to the left, shows that the general Republican victory is not without opposition, not without some friction. It is not easy to see, especially from a European viewpoint, how a society so torn apart can be viable. But this is America….

Let’s get back to the general meaning of the vote and the emergence of a less united society, a society in which the majority rejects any return to the redistributive fiscal measures of the last century. Europeans were wrong once again, having thought that the big debate on inequalities, brought on by the success of Thomas Piketty’s book, was a sure thing. The debate seems to be only taking place within the European-focused circles on the East Coast. Inequalities that really shock people in Europe seem to be tolerated over there. Globalization and the technology boom have reduced the number of middle-class jobs. Here, we are shocked by this kind of atrophy that threatens social justice and the founding principles of representative democracy, but over there, there is no shock at all. It is as if the rise-to-social-power hill has become a lot steeper, but that is just how it is. During the 20th century, the social elevator was automatic for everyone — well, almost everyone; in the 21st, that is over. There are many fewer elected representatives, but those who do reach the top earn a lot more. The motivation, in short, is only stronger.

The only issue, from an American perspective, is losing the jobs that are damned, those that are low-paid because they have been replaced by cheaper Asians or robots, and creating other jobs. The challenge is not to redistribute, to make a U-turn in vain, but to create new jobs that are more specialized or protected from the sweeping winds of globalization. Obama’s defeat must be interpreted as an acceptance of the harshness of this new world, as a return to American roots where the fight for life is a personal one, whatever nature throws at you.

This is obviously not the European model, at least not for now, unless we consider America to be just ahead of us and that, justifiably, to overcome crisis, the E.U. must once again take inspiration from the United States and largely give up on its old, costly social model. This is a huge debate waiting to be had.

In the meantime, there is one group that hasn’t swung as dramatically as the American voters have, and that is the economists. Many of them, if not the majority, remain very skeptical about the durability of this new unequal model. Growth has returned, that is for sure, but at only 2.5 percent it is still weak, which explains why half of all incomes are still falling. As Larry Summers concludes, “Rising inequality operates to raise the share of income going to those with a lower propensity to spend.” There is too much saving and not enough investment and consumption.

It must be remembered, for example, that Apple as well as other world giants are sitting on mountains of cash but do not know what to do with it. The capture of wealth by the “happy few” companies and households, results in a shortfall in combined demand, both nationally and globally, which explains the slowing down in the post-crisis economy.

In the other camp of “inequalitists,” it is believed that taxing the rich will make them go elsewhere and will deter innovation, and overall, impede true growth. Piketty tries to rebut this argument by showing that the capture by the superrich has gone way beyond that. Piketty asserts it will just be fair remuneration for their talent and their innovative spending. Their wealth is anti-growth, but they are so strong that they have acquired a decisive political influence over elected powers through lobbying, over think tanks through financing, and over the electorate by a continuous TV presence. The influence of the super-rich is so strong that they are capable of nipping in the bud any vague desire for redistributive taxes. America may have entered into an oligarchical era where wealth ensures domination through the purchase of minds. The midterm election results are a sad demonstration of this.

It is a solid thesis, and of course debatable. But we must admit that America’s vote is disturbing.