I’m traveling later today and doing some running around, so this will be a bit scattered, but hopefully still useful. Below are a handful of thoughts on the state of our economy, prompted by insightful pieces I’ve recently read. I’m not going to dwell on the current inflation, which has gotten copious coverage, or on gas prices which - same. Instead, these are analyses of longer-term challenges facing our political economy.
First up, Annie Lowery’s 2020 Atlantic Article, The Great Affordability Crisis1 (which I read after her husband, Ezra Klein, cited her work in his column this morning. More on that in a moment). Lowery writes, “[i]n one of the best decades the American economy has ever recorded, families were bled dry by landlords, hospital administrators, university bursars, and child-care centers. For millions, a roaring economy felt precarious or downright terrible.” In all of those basic realms of life, costs have soared. The result is that, even in stretches of good aggregate economic growth, many families feel like they’re falling behind. A widely cited study Lowery refers to found that 2 in 5 adults in the greatest country on earth said they would struggle to come up with $400 in an emergency. Some claimed that finding was exaggerated, that many of those adults could probably patch it together in an emergency for a month or two before resorting to a GoFundme campaign. But the widespread sense of economic insecurity in the United States is impossible to explain away.2
And Klein explains well how that fact can be squared with seemingly care-free consumer spending, how credit and debt has kept households afloat and even conveyed the illusion that happy days are here again for most people:
And so a weird economy emerged, in which a secure, middle-class lifestyle receded for many, but the material trappings of middle-class success became affordable to most. In the 1960s, it was possible to attend a four-year college debt-free, but impossible to purchase a flat-screen television. By the 2020s, the reality was close to the reverse.
The Times published an interview yesterday with Herman Daly, the legendary economist who, for decades, has dissented from mainstream economics’ focus on growth as “the be-all-end-all of mainstream economic and political thinking.” Daly explains that, of course, it’s better to be richer than to be poorer. But, he asks, “does growth, as currently practiced and measured, really increase wealth?” GDP, as Daly and others have long pointed out, only measures benefits, not costs. It is, as they say, a calculator that adds, but doesn’t subtract. In this context, Daly distinguishes between development and growth. Yes, we want to make the scientific and other advances of the contemporary world available to more people in order to improve their life chances. But the question is whether growth, as our economic arrangements are currently structured to prioritize, are helping achieve that? Daly doesn’t believe so.
Daly isn’t only thinking about the United States. The climate crisis is a global one, of course, and is shattering the illusion that the benefits of permanent, unconstrained growth always outweighs the costs “in the long run.”3 But as Lowery and Klein highlight, there is a distinctive and growing disconnect in the United States between GDP and broad-based well-being. The decline in average life expectancy illustrates this gap. But that average decline doesn’t fully capture how disturbing, measured in this most fundamental sense, the well-being gap is. According to a variety of recent studies, wealthy Americans live, on average a dozen or so years longer than poorer Americans. Since 1980, well-off Americans have gained something like six years of additional life expectancy. Worse-off Americans have experienced no gains.4
Covid, in its weird way, papered over some of these issues, both because so many people were dying and because, temporarily, the federal government took aggressive steps to shrink the well-being gap by opening the spending spigot. The tap is now closing, however, and all the underlying problems that Lowery catalogued in 2020 remain or are worsening.
One of the virtues of Klein’s discussion this morning is that he featured prominently Dean Baker. Baker is my favorite economist.5 He’s an incisive critic of mainstream economics thinking and is particularly adept at turning the language and assumptions of the discipline on their head. Baker is especially sharp in explaining how our economic outcomes are not, as is the default understanding, a product of market forces working their will. Instead, they are political, ideological and policy choices with consistently adverse effects on the less well-off. The current yawning chasm between the haves and have-nots is a product of those choices, of politics, not disembodied economics.
Klein observes that “[p]olitics…is not just about the problems we have. It’s about the problems we learn to see.” Or ignore. We’re spending an awful lot of time these days focusing on some eye-popping numbers, like gas prices and inflation. And they’re not to be pooh-poohed. But we’re giving much shorter shrift to the longer term problems that will continue to undermine people’s material well-being and will also, to grossly understate the matter, not help the liberal/progressive political project.
Lowery’s essay was published on February 7, 2020, just as the coronavirus was wading ashore in the US. Obviously, all of the disruptions of the past two years have exacerbated the issues she spelled out.
It has become a punchline in liberal discourse to mock the idea that Trump voters were motivated by “economic insecurity,” as opposed to racism, sexism and xenophobia. It’s true that plenty of people whose primary motivation is racial and gender animus will find other explanations for their behavior. It’s also true that Trump did far better among people making $100,000 or more than people making less. But overall, I don’t think it’s a good political tactic for the left party in this country to downplay how serious a problem economic security is, which is what it sometimes sounds like liberals are doing, especially when we’re talking about white people.
Sorry, couldn’t resist Lord Keynes here: “The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”
There is lots of complexity in carrying out these sorts of studies, but the overall picture - a growing gap in life between rich and poor - is clear.
Yes, I know how nerdy it is to have a favorite economist.