Analyses
The Roots of American Misery
By James K. Galbraith, Project Syndicate, Sep 18, 2020
Sep 25, 2020 - 2:10:16 PM

Among recent inquiries into the sources of American discontent, one finds many simplistic diagnoses based on dubious cliches, but also deep insights that look beyond headline economic indicators and conventional wisdom. And yet analyses that address root causes and offer meaningful solutions remain few and far between.

Robert D. Putnam (with Shaylyn Romney Garrett), The Upswing: How America Came Together a Century Ago and How we Can Do It Again, Simon & Schuster, 2020.
Michael J. Sandel, The Tyranny of Merit: What’s Become of the Common Good?, Farrar, Straus and Giroux, 2020.
Anne Case and Angus Deaton, Deaths of Despair and the Future of Capitalism, Princeton University Press, 2020.

TOWNSHEND, VERMONT – ’Tis a season of trauma and introspection in the United States. As America faces a choice between an Obama-era restoration and the ongoing Grand Guignol presidency of Donald Trump, four leading scholars – two from Harvard and two from Princeton – offer accounts of how their country went from city on a hill to global laughing stock.

Unfair Dealing

The political scientist Robert D. Putnam has written (in collaboration with Shaylyn Romney Garrett, a “writer and award-winning social entrepreneur”) a sprawling account of American discontent and its evolution over the course of the past century. Their central thesis is that things got better across all measurable dimensions – economic, political, social, and cultural – from the early twentieth century until the late 1960s. But then they got worse, culminating in today’s decadence and dysfunction, so reminiscent of the Gilded Age. Putnam illustrates this grand historical sweep with a single inverted-U curve, which he calls the “I-We-I Curve.” The curve, Putnam tells us, captures the rise and fall of common purpose and collective spirit, and conversely, the fall and rise of self-absorption and narcissism – perhaps indecently reflected in our national leaders.

The Upswing

The exact construction of the curve is not very clear. In a footnote, Putnam reports that it is the product of a “factor analysis”; the details are omitted. Much of the book builds on graphs showing a similar pattern for sundry matters, from marginal tax rates and political bipartisanship to civic engagement – a topic Putnam has already presented extensively in his most famous work, Bowling Alone. Apparently, the I-We-I curve is a combination of these patterns.
Michael J. Sandel, a philosopher, has published a tract ascribing populist anger to the rise of “meritocracy,” by which he means the system of academic testing and scoring that was pioneered by Harvard University’s mid-twentieth-century president James Conant, and now widely adopted as the basis for social mobility in America. Conant and his adherents, at the bright dawn of quantitative social science, believed and argued that the rise of objective merit would lead to a decline of hierarchies based on class, religion, and also race, at least to a degree. Sandel’s argument is that this effort, though well-intended, has not worked out.

The Tyranny of Merit

Sandel would not, of course, return to the bad old days of WASP rule. But he notes that the old regime did allow those constrained by rank, religion, or racism to understand that their position in society did not reflect their inferior merit. Any black, working-class, female, or Jewish applicant denied entry to Harvard or Yale could justifiably blame the system. And those confined to lesser options – the coal miners and the Pullman porters – could understand that they were not failures at a personal level; they could take pride in who they were and what they achieved.

This reassuring crutch, according to Sandel, has been ripped away by the cult of metrics and scoring. Those with low scores are losers, with no one to blame but themselves. Doubting that this is an entirely optimal system, Sandel parallels Putnam in developing a social-psychological interpretation of American misery, seeing behind it a rise of isolated insecurity and a waning of solid and self-confident group identities and mutual support. But, interestingly, he also implicitly challenges the analytical approach, involving pattern recognition and quantification, with which Putnam builds his inverted-U curve. The two books converge in conclusions while differing, quite dramatically, in their methods.Neither Putnam nor Sandel are economists, yet both draw on economic evidence to establish the core premise that the American malaise is closely tied to high and rising economic inequality. For their facts about inequality, both rely on the well-known and widely cited work of Thomas Piketty, Emmanuel Saez, and Gabriel Zucman. So, a few words about the reliability of those factual claims are in order.For example, citing Piketty et al., Sandel asks us to believe that the bottom 20% of US households (26 million of roughly 130 million) have an average income of just $5,400 per year, or $104 per week. A similar reference underpins Putnam’s assertion that real incomes have stagnated since the 1980s for the bottom 50% of Americans, and fallen for the bottom fifth.

But there are not 26 million US households scraping by on $104 per week. As the economist Stephen Rose has pointed out, Piketty’s data were based on tax filers, not households, and they exclude all transfer income. There are more than 30 million tax filers who live in households with much higher earners, including older children and retirees whose non-Social Security incomes are very low. Using households rather than tax filers, and including transfers, the average income in the bottom fifth in 2016 was about $35,000, not $5,400, according to the Congressional Budget Office, and the inflation-adjusted change from 1979 to 2016 was positive 33% for that group. In fairness to Piketty, his team recognized the mistake back in 2017, and have abandoned the flawed approach that Putnam and Sandel now cite.Putnam also repeats Piketty’s claim that US wealth inequality today is essentially the same as in the 1920s. Wealth is harder than income to define, and data are scarce, but as a statement about American society this, too, is palpable nonsense. In 1929, before the enactment of Social Security, unemployment insurance, the minimum wage, or the National Labor Relations Act, and long before Medicare and Medicaid, average male life expectancy at birth in America was 55.8 years, compared to about 76.1 years today. Those extra years are largely paid for with the implicit wealth of the New Deal and Great Society social-insurance system – which does still exist, for all of the criticism it receives – and which, unlike private assets, cannot be gambled away.

Through Crimson-Tinted Glasses

To a remarkable degree, Putnam and Sandel offer a view of the world centered on Cambridge, Massachusetts. True, there are some references to scholars at Yale, Princeton, and Cornell, but the impression one gets from both books is that most every worthwhile idea can be found between Fresh Pond and the Charles River. Thus, when Putnam argues that “most economists agree” about the roles of technological change and education in generating economic inequality, he duly references Harvard economists Lawrence Katz and Claudia Goldin, making no mention of the castaways and heretics who have offered opposing views.Similarly, both Putnam and Sandel channel the local wisdom on social mobility, which comes from Harvard’s Raj Chetty. We read that while 90% of those born in the 1940s achieved higher incomes than their parents, only 50% of those born in the 1980s will. Never mind that 1940s parents grew up during the Great Depression, whereas 1980s parents lived in a society that was already very rich. If COVID-19 now gives us a new Great Depression and mass poverty, perhaps today’s children will again experience “upward mobility” over the coming decades. One may wonder whether this would be such a great thing. In fact, Chetty identifies three methodological choices which, if made differently, would have 70% of the 1980s generation earning more than their parents – but we do not learn this from Putnam or Sandel.

While Cambridge liberals fret over inequality, opportunity, education, and technology, they seem blind (or indifferent) to industrial structure, class identity, and corporate power. This is no accident. Their worldview has been airlocked at least since 1973, when the radical young Harvard economists Samuel Bowles, Herbert Gintis, and Arthur MacEwan were banished to the University of Massachusetts, while Wassily Leontief, Albert Hirschman, John Kenneth Galbraith, and other members of the older generation found themselves edged out. Thus was purged any recognition of the legacy of Karl Marx, the real John Maynard Keynes, or the American Institutionalists behind the New Deal.

Putnam’s and Sandel’s books show that the effects have been lasting. Sandel twice refers to his colleague Greg Mankiw, but makes no mention of Marx. Putnam does mention Marx, but only to dismiss him, along with any class-based analysis as “perhaps derived from Marxism.” Both make only passing references to Keynes (and in Sandel’s case, it is a single misleading remark). Putnam includes only a minor reference to the work of my father, who seems to have been almost forgotten at the university where he was the longest-serving professor.Sandel’s discussion of the merit-based admissions processes at Harvard and other elite colleges is long, yet he hardly discusses America’s changing industrial and class structure, which generate the applicant pool in the first place. (Nor does he discuss recent allegations of ongoing ethnic bias, currently being tried in a Boston court.) He writes at some length of Ronald Reagan’s rhetoric of markets, self-reliance, and small government – but not at all about how Reagan’s administration and the US Federal Reserve under Paul Volcker gutted America’s industrial heartland in the early 1980s. Their policies – high interest rates and spending cuts, leading to recession and mass unemployment – wrecked the manufacturing companies and the trade unions that were the backbone of the economy and the middle class. Putnam speaks only briefly of unions, disparaging them for “blunders” and claiming “a growing individualism among younger workers, who preferred watching television in the suburbs to bowling with the guys in the union hall.” If this sounds a bit condescending to readers from outside the Brahmin bubble, that’s because it is.

The “Whys” of Despair

In refreshing contrast, Anne Case and Angus Deaton, wife-and-husband economists at Princeton, offer a careful, deep, and troubling look at the America that lies beyond the Ivy League. In a study organized around the grim recent decline of life expectancy among white males and the equally grim rise of deaths from suicide, alcohol, and opioids, they demonstrate a broad range of knowledge, analytical nuance, and open-mindedness. They do not start with some certainty that will be hammered home, nor do they try to explain everything with a single trademark concept, as Putnam does with individualism and Sandel with meritocracy. Rather, their book is an exploration of historical patterns guided by a meticulous effort to reconcile statistical facts with plausible explanations.

Deaths of Despair

A great merit of Case and Deaton’s approach is their blunt assault on named villains, starting with the producers and peddlers of opioids. “In the opioid epidemic,” they write:
“… the agents were not viruses or bacteria but rather the pharmaceutical companies that manufactured the drugs and aggressively pushed their sales; the members of Congress who prevented the [Drug Enforcement Administration] from prosecuting mindful overprescription; the DEA, which acceded to lobbyists’ requests not to close the legal loophole that was allowing importation of raw material from poppy farms in Tasmania that had been planted to feed the epidemic; the [Food and Drug Administration], which approved the drugs …; the medical professionals who carelessly overprescribed them; and the drug dealers from Mexico and China who took over when the medical profession began to pull back.”They also single out Republican US Senator Marsha Blackburn of Tennessee, former Republican Senator Orrin Hatch of Utah, and the now-notorious Sackler family (two of whom were knighted by Queen Elizabeth in 1995), the owners of Purdue Pharma, the manufacturer of OxyContin.Case and Deaton christen the problem of declining white male life expectancy “deaths of despair,” a term that captures the social psychology behind the lethal abuse of booze, pills, needles, and guns. Skeptical of simple economic explanations, they examine and then rule out any direct relationship between deaths of despair and poverty, income losses from the post-2008 Great Recession, or even unemployment. This absence of economic determination is understandable once one realizes that mere income losses are, to a considerable extent, cushioned by unemployment insurance and Social Security, contrary to the Cambridge consensus.But if not income losses, poverty, or inequality, then what? Case and Deaton describe “a long-term and slowly unfolding loss of a way of life for the white, less-educated, working class.” While unemployment rates rise and fall, and poverty can cause real pain, the decline of community that follows the loss of a major employer – reflected in small-business closures, decaying schools, and declining local services – cuts deep. Case and Deaton argue that the insecurity, precarity, and despair accompanying life in such communities are much harder to deal with than mere loss of personal income.Case and Deaton do also stress the gap between those with and without a college education. It’s a divide that runs deep, but how should it be interpreted? It is tempting to reify the diploma, to read the divide as evidence that if more people went to college, they would ipso facto lead happier, more fulfilling lives. But the US already puts more people through college than most countries, and yet, so far as we know, deaths of despair are decidedly more prevalent in America than in, say, Europe or Asia.A more convincing analysis would lead back to those inconvenient economists: Marx, Keynes, and Galbraith père; to the early writings of Bowles and Gintis; and to Harvard’s own great mid-twentieth-century reactionary, Joseph Schumpeter – to whom Case and Deaton do pay fair homage. The lesson is that society only has a certain number of open doors to what Thorstein Veblen famously called the “leisure class”: the professions, the academy, competitive finance. College opens those doors, but does not widen the doorways. And when the industrial classes have been decimated by technology and trade, it is inevitable that millions who were once supported by industry will fall down, not climb up – irrespective of how much schooling or retraining they obtain.The services jobs that have fueled US economic growth for the past 40 years – until the pandemic began to destroy them – are numerous. But generally, they are neither well-paid nor otherwise rewarding. Often, they are what the late David Graeber memorably called “bullshit jobs.” While not typically backbreaking, they are often demanding in a repetitive, tedious, chronic-pain-inducing way. Expanding college completion without creating better jobs would merely increase the number of frustrated aspirants to the leisure class. That could be a formula for more despair, not less.

Half-Measures and Non-Solutions

When Case and Deaton turn to potential solutions, their verve and insight falter, and – sad to say – they join their Harvard colleagues in endorsing half-measures. They call for more education and decry the economic costs imposed on households by the current US health-care system.But they ignore the fact that more than one in ten jobs in America are in health care. And while the country’s health-care system has many faults, it does at least provide services that people actually use and benefit from (for the most part). Although Case and Deaton urge health-care reform, they do not advance a plan. Medicare for All was a major theme of the 2020 election campaign; Case and Deaton do not mention or discuss it.Deaths of Despair winds down with an aimless discussion of immigration, new technologies, globalization, and the supposed need for more business competition and tougher antitrust enforcement. But if the rat race already generates disparate outcomes that sow so much despair, why would even more competition improve the popular mood?Sandel would replace the supposed meritocracy of the Ivy Leagues with a lottery among those deemed qualified – a micro-solution to an ant’s-eye view of America’s problems – while shifting the burden of taxation from labor to speculation and (of all things) consumption. The rich, of course, would have no problem with higher sales taxes, because consumption makes up a small share of their income compared to those lower down the ladder. How such a tax, which is already a mainstay in America’s most regressive states, would foster the “common good” is a mystery.Among these three books, Putnam’s is perhaps the most radical in its proposed solutions. He would like to see a moral reawakening along the lines of the Progressive Era of the early twentieth century. And yet his is a singularly patrician view of social change. Along with trade unions, Putnam has no time for populists, socialists, or radical activists generally. As such, he does not mention Modern Monetary Theory, a job guarantee, or the Green New Deal, the actual agenda of the progressive movement in America today. His chapter on race makes no mention of police violence or of the Black Lives Matter movement.

Still, Putnam’s central claim that America’s social solidarity peaked in the 1960s and has been on a long, slow decline ever since rings true enough to a survivor of that era. With the enactment of President Lyndon Johnson’s Great Society (including its War on Poverty and the Civil Rights and Voting Rights Acts), the 1960s effectively marked the completion of the New Deal. This was the apogee of US industrial dominance, as described by my father in 1967 in The New Industrial State. But then came a decades-long parade of recessions, unemployment, and inflation, of policies to cut wages and defeat labor while supporting the dollar. This triggered the transformation that would leave the Midwest gutted and unions neutered, while America built its “new economy,” a bi-coastal confection of technology and finance.
It was the calamitous legacy of this transformation that laid the foundation for the rise of US President Donald Trump. In in 2016, Trump captured precisely those states with the least growth in inequality over the past half-century, while losing in states where inequality has increased the most. In the (mainly) coastal states where Hillary Clinton won, the rapidly rising incomes of urban professionals have coincided with rapid growth in communities of low-income immigrants and minorities – both bastions of today’s Democratic Party. In the former heartland, there is much less of either one and much more resentment against both. And there, in a nutshell, is the source of Trump’s power.And Sandel, whose focus is the role of the Ivy League and its imitators in our current pseudo-meritocracy, is right to be disgusted by the self-absorbed mantra of individual worthiness that so effectively disguises the oligarchy that America’s elite universities have always existed to serve. Likewise, Case and Deaton make a powerful indictment of the neglect, decay, and predation afflicting the heartland, so poorly understood across the cultural chasm that has come to separate the prosperous coasts from the neglected interior.In short, these books are a curious blend of insight and constraint. There is something to each, but the limitations of a perspective of prestige and position are evident in all of them. It seems that part of what America lacks these days are voices of an authentic radicalism capable of reaching a mass audience with the full, brutal honesty that the situation demands. It may be too difficult to frame and advance such a critique from the commanding heights of Harvard and Princeton. Meanwhile, a fraud like Trump reaches over 80 million people with every tweet, and a large part of the country has come to distrust everything that its government, media, philosophers, and social scientists want it to believe.