Inequality and the American Dream

April 1, 2010

I returned last week from Mexico where an American with whom I had dinner was building a house in a small village. He told me, sitting by the luxurious lapping waves of the Pacific Ocean and after a good bit of tequila, that it had cost him $10,000 to smooth his building permits through the official approvals. This was money that he had given to a certain well-known notary, who knew certain well-known officials, who had got the whole thing done rather without pain.

As to the usual procedure, (if you are not an American with $10,000), Hernando de Soto some time ago published a book in which he reported studies done in five developing countries (with occasional references to Mexico), in which the permitting process for building a new house outside Cairo, Egypt, or Manila, the Philippines, or Bogota, Peru, was apt to be as long as 10-12 years with the necessity of stopping by some 100-200 offices for approvals, and as the case might be, for bribes. That is how long it would typically take, according to De Soto, to get the permitting done in those countries that did not have the modern rule of law, or which were ruled by family and clan, or in the place of family relationships, relationships purchased by bribes. In my book, Democracy At the Crossroads, I call this ancient culture, the culture of feudalism. Our history books to the contrary notwithstanding, while the knights in armor, the horses and jousts have ended, the core values of feudalism, clan, class, dynasty and privilege, have persisted, and still persist, in most of the world.

That is the case of course in Mexico: if one is not a wealthy American able to pay $10,000 to a well-known notary who can make instant contact with certain well-known officials, then one is going to still remain in the lower classes, separate from property because all the property is owned by a few at the top. A modern guide book to Mexico tells visitors openly that 1,000 privileged families, have, since the independence of Mexico in the early 19th century, maintained their pure European blood and their status at the top of Mexican society, their power and their control. That is feudalism. And that is today. But it is not just Mexico.

A new book deals with the residual effects of this feudalism and the inequality that exorbitant privilege produces around the world including the United States. Not only is Mexico and not only are the developing countries dysfunctional, the greater the degree of inequality between the top and the bottom, the greater are the problems of functionality throughout the culture, and in developed countries as well.

I use the term "functionality" to signal that this is not just a moral problem, or a problem for churches and philosophers. When we say that a society becomes dysfunctional, as opposed to just immoral, we mean that it does not operate effectively, the system is clogged, as in the multiple years and bribes it takes to get a building permit in Mexico or Egypt or the Philippines. But we mean more than building permits.

Inequality, according to a the book of which I speak, The Spirit Level, by Richard Wilkinson and Kate Pickett, tracks so often with poor education, prison enrollment, obesity, teenage pregnancy, worse over-all health and care, shorter life expectancies and even lack of happiness or sense of well being, that it must be thought of not only as a symptom but as a cause of all these problems.

Now that is something quite startling. Not only is inequality bad for us in our hearts; we don't like to pass the homeless man on the street; it is bad for us in all the measures that make a society function well. Inequality has evil effects upon our productivity, our education, our striving, our initiative taking, and our sense of possibility, across the board.

Think about that list: all of those qualities, productivity, a desire for education, pride in American initiative, a 'can do' attitude, were part of my rural upbringing in my little three-room country school: These were typically American qualities; they might even have been at the heart of what it meant-out there on the wheat fields of eastern Colorado-to be an American. Anyone of us could go from being a farm hand and a fence fixer to school and then to university, and then to whatever. "The sky's the limit," said my mother.

Now we are told by Wilkinson and Pickett that the greater the degree of our inequality right here in this country, the greater the gap between the rich and the poor, the greater will be our inability to be, and live, like Americans, or the values that we have always assumed were at the heart of our American success.

This is the opposite of the story that we have been told for the last 30 years. The tax breaks for the wealthy pushed through by Ronald Reagan and George W. Bush were supposed to unleash American economy and trickle down to create our general prosperity. But the result was to the contrary. By 2007, America's top one percent received 23 percent of the nation's total income, tripling the gap of 1980 when these policies were begun.

Now Wilkinson and Pickett say that by increasing the gap between the rich and the poor, by allowing and fostering a situation in which only 10% of the American population owns over 40% of the wealth, we have actually diminished American happiness, increased problems of educational aspiration, teenage pregnancy, drug use, prisons, crime, and our general sense of hopelessness.

And here is an unexpected twist: That general sense of hopelessness is not limited to those in poverty or even the middle class. A kind of cynicism about the way the world works gradually permeates the society top to bottom. Cynicism that is the right hand of indifference, it is, in a word, un-American, and it underlies-becomes the foundation for-the rest of our problems.

Not only is inequality present as a sort of lamentable outcome of the promise of America, say Wilkinson and Pickett, rather, it is the inequality itself that creates these problems.

Let me say it again: Inequality is not the result of our problems. It is the cause of our problems.

It is not hard to imagine why this is so. When the gap is so large, when the chance of ever rising out of poverty is so small, when the income of the corporate CEO is three hundred times that of the average wage earner in the company, when a worker looks up and sees that the CEO is getting millions even when his company fails, but that he, the worker, is fired for those failures, he readily comes to the belief that the system is unfair. He works hard, but those who control capital at the top make wrong decisions and rather than being treated equally, the one with capital at the top moves on to other things; and he at the bottom without capital is fired.

When the CEO is fired he or she is rewarded with stock options and millions in severance pay. But when the worker in the middle or the bottom is fired he or she loses his health insurance and the house, the children's college fund, and their future, and there is no fairness in that because he or she knows that he or she is as moral as the next man and as hardworking as any CEO. They read about CEOs on hunting trips in Scotland and have time to read about them because they are sitting at home reading the want ads, looking for work.

It is not hard to see why, under these conditions, cynicism is sweeping America today, and that the rage in America is fueled by the loss of some dream, some thought that we Americans were not like this, that this is not what we came for. The search then turns to find someone who betrays us and the obvious targets are people in politics, people not like us, people on welfare, black people, immigrants, targets literally painted in broad strokes by billionaires like Rupert Murdoch and by multi-millionaires like Rush Limbaugh and former beauty queens like Sarah Palin, who is not doing so badly herself, using the money of the rich to encourage the middle class to attack the poor.

It is not long before the unemployed worker, encouraged to anger and blame, motivated by fear and uncertainty, becomes cynical, and that cynicism is a poison in a democracy.

In these conditions any man or woman is apt to be not just cynical, but furious. And when we are furious we refuse to report our incomes, or pay our taxes, and when we do not pay our taxes we are simply opting out of the common endeavor and when millions opt out of the public realm, that is bad for democracy. Democracy cannot withstand the loss of millions who do not believe in its fairness.

Today, this great disparity between the rich and poor has become the most publicized caricature of the new American economy, the most well known and widely talked about probably because of outrageous bonuses for bankers and investment brokers. It is no wonder that those on the bottom feel hopeless and cynical, and those on the top feel attacked and cynical, and those in the middle feel cynical and furious at everybody.

It is no wonder then that in this social climate some individuals resort, if they are young women, to pregnancy, each attempting to produce a least one human being bound to her by love, or, if he is a young man, that he turns to selling drugs because it is the only form of capitalism that he can begin without capital and it requires just a little American courage to get started. Or if they are lawyers they take the shaky case and will go after corporations simply because someone ought to go after corporations, and if they are doctors they will do the extra test that is inefficient and not really necessary because they are afraid of the lawyers and if they are not afraid of lawyers, well, they ought to be paid as much as glad-handing CEOs who sell phony derivatives and get away with it and are rewarded with millions of federal dollars.

It is no wonder that the middle class feels divided from the rampaging drug dealers who rob them in their homes because they cannot afford to live in gated communities, or that the wealthier classes behind their gates feel separated and threatened by both those whom they are boxing out.

The book to which I have referred is called The Spirit Level and one is to assume, I think, that this title was chosen because the greatest cost of income inequality in any culture is to the spirit. The damage does not, surprisingly, come from the absolute inability to buy a new house or a new car, so much as from the comparative lack of well being one feels in a culture when the gaps between my opportunity and that of the fellow I read about in the newspaper is beyond repair.

Wealth and material goods by themselves do not cure this spirit, and poverty is not so much the problem as the sense that it is hopeless to try to narrow the gap or to reach the top. Therefore, say Wilkinson and Pickett, no matter what the absolute material level, and America's poor are materially well above the poor in any other country, the overall sense of well being nevertheless suffers when the gap between the rich and poor becomes insurmountable.

In a list of 23 developed countries, according to Wilkinson and Pickett, beginning with Japan and running through the Scandinavian countries, then to Switzerland, Greece, Australia, the income disparity is greatest of all in the United States with only one exception, Singapore. We are the worst, but one, in income disparity of all the developed countries.

As a result, the whole of American society feels a loss of community or sense of common purpose. And it is no wonder that without a sense of common purpose, a vision of what we stand for as a people, as a whole nation working together, that the overall sense of well-being and happiness in the country spirals downward like a wounded and damaged aircraft, out of control.

Now comes Republican Minority Leader John Boehner from Indiana proclaiming the day after the historic passage of health care reform that the law will "ruin of the nation."

He says we have a choice between big government and the free market and that the free market has saved America and made it what it is today. Well, he is right that the market and scaling back government has made us what we are today. Precisely that. The free market in 30 years has nearly tripled the income share for the top 1% of our population. And now we are only behind Singapore, of all the developed nations, in the enormity of the gap between the rich and the poor.

Boehner is right in his own way, that, historically speaking, the free market did much to create greater equality between the social classes, in effect to create a middle class that eventually resulted in the English parliament and the US Constitution. I go into great detail about this in my book, Democracy At The Crossroads which is available on the table over there and to some extent Boehner and all the advocates of free capitalism are right.

We owe a great deal to the free market and an evolution through that market of the middle class over some 700 years.

But what the market gives it can also take away and today marketing democracy and marketing votes is doing a great deal to clog, intimidate and paralyze the congress and the validity of American elections. So there is not a simple answer to be found in reference to the free market. Free markets undoubtedly gave rise to democracy. But free markets can also, and are now threatening, to destroy democracy.

What Boehner does not mention, and the advocates of the free market do not mention is that government has become big, and therefore most objectionable, when that government has undertaken to narrow the great gaps between the rich and the poor. It is precisely when inequality is the problem and greater equality of opportunity is the objective that certain interests react with the greatest passion and outrage, or as we used to say in rural Colorado, when men squeal like stuck pigs.

They squealed at the regulation of railroads and robber barons in the late 1800s, and at the New Deal in the 1930s, and at Social Security in the 1940s, at the Great Society and Medicare in the 1960s, and they squeal even today about the efforts to regulate bonuses of the bankers. In all these cases, the issue that provoked the people of America into using their democracy for their own benefit, and not just the benefit of those who own the most property, was growing, disastrous, inequality.

The squeal of the stuck pigs has always been the loudest when the effort has been to create equal access to the trough. I won a pig at a raffle at our Grange Hall in Arapahoe County, Colorado, once, and raised that little pig to be a full sized hog. She was the only pig I ever won and therefore the only one at the trough in her pen. But sometimes I would try to push that hog away from the trough, even when there was no other pig in there, and she would squeal to wake the heavens. And if the little ducklings came in there into that pen next to his trough, she would eat them.

That's the way it is with people, too, when they are the only ones at the trough. They will eat the ducklings like Enron ate California consumers and Blackwater ate civilians in Iraq and Monsanto sues competitive wheat farmers of the Midwest.

Big government is objected to, it is said, because it is inefficient, clumsy, and slow. But what could be more inefficient, or clumsy, or corrupt, even, than no-bid contracts to private businesses like Haliburton and Kellogg, Brown and Root, in Iraq? What could be more hide-bound and out of touch than the private management of General Motors over 30 years? What could be more delusional than the private mathematics that lured AIG into fantasies of insulation from loss? What could be more corrupt and private than Tyco or Enron, or CEOs who were paid millions in bonuses even when they were failing?

And of course the argument about the free market as opposed to big government is probably also a disguise for something else:

United States Senator Jim Dimint of South Carolina also called the new health care law "the destruction of America." Perhaps without knowing that he was doing so, he identified a theme that runs throughout South Carolinian and American history.

At the Constitutional Convention in 1787 South Carolina's delegate to the Philadelphia Convention, John Rutledge, was on the fence whether it was better for South Carolina to join the Yankees in the federal union or seek alliance with the French Haitians in some other league that protected plantation slavery. Sixty years later, South Carolina's Senator John C. Calhoun proclaimed the right of his state to nullify federal actions, particularly those that would limit the slave trade. Thirty years later, South Carolina started the Civil War by firing on Fort Sumter and here too equality and racism were mixed inextricably. Sixty years on, again, South Carolina's Senator Ben Tillman in 1910 declared on the floor of the US Senate that white people possessed the absolute, God-given right to string black people up by the neck and lynch them without trial, violating the laws of every other part of the federal Union and here too, the issue of equality and race were mixed. South Carolina's Senator Strom Thurmond in 1948 ran for president to keep segregation alive, and thus inequality alive, and fought against government attempts to create equality all the way until his death as a United States Senator in 2003.

It is consistent with this tradition that Senator Dimint of South Carolina today says that equality in health care today will destroy this country, or at least, his country.

In his state, today, 54% of those who do not have health insurance are non-white. That would mean that the health insurance legislation that Senator Dimint thinks will destroy this country would do so by aiding more blacks and Hispanics and Native Americans than whites in his state.

It is consistent with this South Carolina tradition, as well, that Senator Dimint says that he will do everything he can, resist any legislation, create any embarrassment, if it will cause our first black president to fail.

The senator will say that it has nothing to do with race. And superficially he may be right. But race and equality have forever been mixed. At bottom, the race issue is about equality too. So take your pick.

I use South Carolina today as a metaphor. It would be an overstatement to say that all of the resistance to Obama or health care is about race. It would be an overstatement to say that all the fear about big government is about race. It is not. But the argument whether it is race or equality is a false distinction. They are bound together.

The passion may seem to be about keeping government small and the market free but when we look at the major attempts to grow government they have mostly been attempts to either cure problems of equality or problems of race. They are so intertwined as to be almost inseparable.

In the big picture, therefore, inequality leads any society to become less functional and the US is tending toward outrageous inequality. It is not only bad for those on the bottom; it is bad for those on the top.

We now have the studies to show that trust increases, mental illness decreases, life expectancy increases and infant mortality decreases, obesity is less a problem, educational performance is greater, teenage births decline, homicides decline, imprisonment rates go down when any society experiences greater equality.

It makes sense. We probably already knew this.

Let us therefore, as a small group in this small community, not allow ourselves to be battered and frightened by shouts and fears of socialism and too big government. We are speaking for rich and poor alike when we say that the gap must be narrowed for us all to survive, and we must all survive or none of the qualities of imagination, creativity, curiosity, and motivation will survive, and without these neither will democracy survive.

Thank you.