4 March 2020

It’s not always just the economy, stupid


American public life is not short on warnings of existential threats. Barely a day goes by without the country being told that Trump is dismantling vital institutions, or that Democrats threaten cherished freedoms or that billionaires are robbing the rest of us of the livelihoods we deserve.

In this feverish climate, telling a relatively banal truth can be a revolutionary act. That is what Michael Strain has done in The American Dream is Not Dead, a short new book that takes aim at some of the alarmist claims made about the fate of the average American in today’s economy.

Those reading the American dream’s funeral rites come from across the political spectrum, with everyone from Tucker Carlson and Marco Rubio on the right, to Joseph Stiglitz and Bernie Sanders on the left. But according to Strain, a scholar at the American Enterprise Institute, the numbers simply don’t support the idea that capitalism isn’t working for ordinary Americans.

“A country as large as ours, in which citizens have such varied experiences, makes generalizing difficult,” he writes. “But today’s prevailing narrative is so stark that the task of generalizing becomes much easier. The narrative is wrong. America is upwardly mobile, particularly for those nearer the bottom of the income distribution. Incomes aren’t stagnant. Workers do enjoy the fruits of their labor. The argument that life hasn’t improved for typical households in decades borders on the absurd. The game is not rigged.”

Strain reports that wages for typical US workers have increased by a third in real terms since 1990. The nonpartisan Congressional Budget Office (CBO) paints a fuller picture of household income, measuring a market income that includes non-wage factors like employer-provided health insurance, and business and capital income. That measure of inflation-adjusted income after taxes and government transfers increased by 44% for median households between 1990 and 2016. For the bottom 20%, income grew by 66%. It is understandable that politicians and pundits want these numbers to be higher still, but the common characterisation of US incomes as “stagnant” just isn’t true.

Yes, the increase has often been greater for those at the top, but reports of runaway inequality are also overstated. According to the CBO, income inequality increased by around a quarter between 1979 and 2007. Since then, however, the CBO finds that, measured by income after taxes and transfers, inequality has decreased by 7%. In other words, at the exact moment when the dominant narrative about American capitalism became about the ever-growing gains flowing to the rich, the trend stalled. Strain finds that between 2007 and 2019, the ratio of the 90th percentile of weekly earnings to the 10th percentile increased by just 1%.

Strain’s excellent corrective goes into detail on these and other aspects of an economy that is delivering for ordinary Americans and which is broadly upwardly mobile. Even the hollowing out of middle-income jobs at the heart of many gloomy accounts of the US economy will eventually be shown to be a good news story. There has been considerable disruption, but a new higher-skilled middle class is replacing an old one. Making sure American workers have the requisite education and training to thrive in these new jobs may be a policy challenge, but it also represents an opportunity to build a more productive, higher-earning US workforce.

Strain is careful to point out that this good news should not obscure America’s “serious social challenges”: “decaying social capital, increasing socioeconomic fragmentation, ‘deaths of despair’, the opioid crisis, and a very troubling increase in suicides”. But “pockets of real struggle in American life” should not be confused “the broader canvas of the American experience”.

Moreover, premature reports of the American dream’s death can become self-fulfilling prophesies, telling Americans that the system is rigged and they will not be rewarded for their hard work is demotivating. The truth, by contrast, “better aligns with the national narrative — the story we tell about ourselves — that has helped fuel prosperity and opportunity”.

Why the reluctance to accept these heartening facts? Notwithstanding a good-faith and complicated debate about how best to measure changes to wages and the cost of living over long periods of time, a positive bill of economic health just feels at odds with the political moment.

That gap — between the economic climate and the political weather — matters hugely. And I think it goes a long way to explaining the diverging fortunes of the right- and left-wing political parties not just in the US but across the West in recent years.

Too often, the left flits between a social progressivism completely detached from most people’s concerns and an economic reductionism that tries to distil the gory details of life’s ups and downs to the gini coefficient. For all that the right is accused of obsessing over lucre, today’s left-wing populists are the are the ones who tend to attribute every social malady to the bank balances of the super-rich. Bernie Sanders may see America’s billionaire class and the capitalist system that created them as the root of all his country’s ills, but I suspect this fails a common-sense test for millions of Americans. Jeremy Corbyn spent the weeks before his electoral flop last December painting a monochrome picture of a Britain characterised first and foremost by splendour at the top and destitution at the bottom. The results would suggest this was not a country that voters recognised.

Successful conservatives, meanwhile, have presented a more believable, three-dimensional picture to the electorate. For all the accusations of populist posturing, Boris Johnson’s Conservative government has a more sophisticated account of where economic, political and cultural power lies, and what should be done to reclaim it than critics would acknowledge.

Plans to level up parts of the UK that have lagged behind London and the south-east for years are only part of a bigger political resettlement. The Government makes the case for economic renewal in terms that emphasise the social and cultural costs of neglect, and that rings true in the hearts of voters who know that the health of their community is about more than the bottom line.

It isn’t just a party-political divide. The loss of the 2016 referendum on EU membership was so perplexing to some Remainers in part for a failure to see that economics was not the be-all-and-end-all for voters. By contrast, the Leave campaign built a catch-all message of control that made room for a less quantifiable powerlessness felt by millions of Leave voters.

Donald Trump may not be known for sticking to the truth – indeed he is responsible for a lot of the doom-mongering Strain is pushing back on – and his handbrake turn from ‘American Carnage’ in his inaugural address to ‘Keep America Great’ in his re-election bid tells a grossly oversimplified story. But his conservative populism achieves something similar.

Strain’s book is, first and foremost, a much-needed appeal to economic reason. His argument is much more than just glass-half-full optimism; the glass is fuller than you think. But it is also a reminder that not every social or political frustration is a product of ‘neoliberalism’ or ‘late capitalism’ or whatever the economic status quo gets called by its critics. In other words, it’s not always the economy, stupid.

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Oliver Wiseman is US editor of The Critic