24 November 2014

Capitalism and inequality: On American class


Deepak Lal’s third article in his three part series on capitalism and inequality.

My first and lasting impression of America, echoed by numerous observers from the hierarchical societies of Europe and Asia, was the absence of class, despite great inequalities of income and wealth. But today, many see a class society emerging in America. An important book by Charles Murray, Coming Apart, delineates and outlines the causes of this changed cultural landscape.

To control for race and ethnicity he examines the social trends for the non-Latino white population of prime age adults from ages 30 to 49 (controlling for changes in ages of marriage or retirement). He divides this population into 2 groups: a broad new upper class (who have at least a bachelor’s degree and are in professional or creative jobs) who he labels Belmont, and a new lower class (who have no more than a high school diploma and are in blue collar or low-skill service and white collar jobs) who he labels Fishtown. About 20% of the US white population aged 30-49 are in Belmont, and 30% in Fishtown.

Since the 1960’s striking differences have emerged in the cultural norms of these groups relating to marriage, single parenthood, industriousness, crime and religiosity. In 1960 marriage was the norm in both groups with 94% married in Belmont, 84% in Fishtown. There was a similar decline in these percentages in the 1970s, but in the 1980’s a great divergence emerged. Marriages stabilised in Belmont, with 83% in Belmont married, but a mere 48% in Fishtown. A similar divergence emerged in non-marital births. In Belmont they rose marginally from 1% in 1970 to 6%, in 2008, but in Fishtown they exploded from 6% to 44%. All the available evidence shows that, controlling for income and education of parents, children of unmarried women fare worse than children in divorced families, and far worse than those in families which remain intact.

These trends have little to do with the labour market, and the purported disappearance of a wage sufficient to raise a family. In 1960 the mean annual earnings of males in Fishtown was $33,302 (in 2010 $). In 2010 it was $36,966 (using the identical definitions of working class occupations).

The famed US work ethic, which required every able bodied male to be available for work, has been eroded in Fishtown , with the percentage out of the labour force steadily rising from 3% in 1968 to 12% in 2008, irrespective of the trade cycle, whereas in Belmont are only 3% are out of the labour force. Fishtown’s trend is due to the perverse incentives created by a growing welfare state. (Murray: Losing Ground).

The violent crime rate, which rose nationally from the mid 1960’s through the 1980s, remained flat in Belmont, but more than sextupled in Fishtown, and despite the fall in the national rate since the mid 1990’s, is still 4.7 times the rate in 1960.

Religiosity, which de Tocqueville saw as a defining feature of American culture, has also declined in both groups, but much more in Fishtown. The numbers of irreligious rose from 29% in 1970 to 40% in 2006-10 in Belmont, and from 38% to 59% in Fishtown.

This divergence in cultural norms between the two groups is mirrored in their different life styles, and is accentuated by assortative mating, with children of the elite inter-marrying. With the importance today of brains rather than brawn in determining incomes, the upper middle class is perpetuating itself, with many third generations being brought up with the values, tastes, and higher incomes of their grandparents. Murray argues that there is little that public policy can now do to reverse these trends, and that the only way to restore the famed “American way of life” is for the upper classes not to condone the behavior of the underclass but hold them to the same standards and values they apply to their own.

The second measure Murray commends is ending the spatial segregation, with the elite residing in wealthy ZIP codes he calls Super-ZIPs. Though also present in the 1960’s, they were not uniformly wealthy or affluent. The median family income in 14 super ZIPS in 1960 was only $84,000 (in 2012 $), and only 26% of their inhabitants had college degrees. By 2000 their median family income had doubled to $163,000 and 67% had college degrees. Murray recommends that, members of the elite should relocate, and participate in the unique American way of life, where as noted by Alexis de Tocqueville: “the more opulent citizens take great care not to stand aloof from the people. On the contrary, they constantly keep on easy terms with the lower classes: they listen to them, they speak to them every day.”

In another important, more optimistic book, Joel Kotkin (The Next Hundred Million: America in 2050) recognises the residential polarisation that has occurred. But, he argues, a new model of urbanisation pioneered by the sprawl of Los Angeles is replacing the old urbanisation model of a city, epitomised by the previously aspirational cities of New York and Chicago, with their concentration of cultural activities in a downtown centre, where the upper middle classes lived, surrounded by areas of the middle and working classes providing the requisite  services.

These old cities have now become ‘luxury cities’, as dubbed by the mayor of New York, Michael Bloomberg. The well-educated, wealthy and nomadic denizens of these super cities purchase critical amenities, such as child care and open space, on the private market. But, with their high cost of living, they no longer provide the upward mobility and a home for the middle class, who have moved further out to the periphery.

In Manhattan, the elite group is supplemented by a constantly rotating, nomadic population of younger, often highly educated people who come to the city for school or for the early part of their careers, later moving, along with many of the aspiring new immigrants, to the growing number of sprawling cities in the Sunbelt and the Rust Belt. These are multipolar: a disbursed collection of suburban villages with more than one job centre, and a multiplicity of occupations, linked by the car and  the growth of the internet, which allows people to work increasingly from home. They provide what the American Dream has been about: “a good job, a decent school, proximity to relatives, a safe neighborhood”, and the features of suburbia – trees and open spaces, a “low-key shopping street, a place for a spacious apartment, a townhome, or even a single-family residence.” They are likely to maintain the American civic culture, in an emerging multi-racial and multi-ethnic environment which will allow a continuing pursuit of the American Dream.

Deepak Lal is Professor Emeritus of International Development Studies, UCLA