David Brooks on Income Inequality

David Brooks, the New York Times’ conservative Op-Ed columnist, had this in today’s paper (our take on it follows):

The American Way of Equality

Income inequality is on the rise. The rich are getting better at passing their advantages on to their kids. Lifestyle and values gaps are widening between the educated and uneducated. So the big issue is: Will Americans demand new policies to reverse these trends — to redistribute wealth, to provide greater economic security? Are we about to see a mass populist movement in this country?

Nobody was smarter on this subject than Seymour Martin Lipset, the eminent sociologist who died at 84 on New Year’s Eve. Lipset had been a socialist in the hothouse atmosphere of City College during the 1940s, and though he later became a moderate Democrat, he continued to wonder, with some regret, why America never had a serious socialist movement, why America never adopted a European-style welfare state.

Lipset was aware of the structural and demographic answers to such questions. For example, racially diverse nations tend to have lower levels of social support than homogeneous ones. People don’t feel as bound together when they are divided on ethnic lines and are less likely to embrace mutual support programs. You can have diversity or a big welfare state. It’s hard to have both.

But as he studied these matters, Lipset moved away from structural or demographic explanations (too many counterexamples). He drifted, as Tocqueville and Werner Sombart had before him, to values.

America never had a feudal past, so nobody has a sense of social place or class-consciousness, Lipset observed. Meanwhile, Americans have inherited from their Puritan forebears a sense that they have a spiritual obligation to rise and succeed.

Two great themes run through American history, Lipset wrote in his 1963 book “The First New Nation”: achievement and equality. These are often in tension because when you leave unequally endowed people free to achieve, you get unequal results.

Though Lipset never quite put it this way, the clear message from his writings is that when achievement and equality clash in America, achievement wins. Or to be more precise, the achievement ethos reshapes the definition of equality. When Americans use the word “equality,” they really mean “fair opportunity.” When Americans use the word “freedom,” they really mean “opportunity.”

Lipset was relentlessly empirical, and rested his conclusions on data as well as history and philosophy. He found that Americans have for centuries embraced individualistic, meritocratic, antistatist values, even at times when income inequality was greater than it is today.

Large majorities of Americans have always believed that individuals are responsible for their own success, Lipset reported, while people in other countries are much more likely to point to forces beyond individual control. Sixty-five percent of Americans believe hard work is the key to success; only 12 percent think luck plays a major role.

In his “American Exceptionalism” (1996), Lipset pointed out that 78 percent of Americans endorse the view that “the strength of this country today is mostly based on the success of American business.” Fewer than a third of all Americans believe the state has a responsibility to reduce income disparities, compared with 82 percent of Italians. Over 70 percent of Americans believe “individuals should take more responsibility for providing for themselves” whereas most Japanese believe “the state should take more responsibility to ensure everyone is provided for.”

America, he concluded, is an outlier, an exceptional nation. And though his patriotism pervaded his writing, he emphasized that American exceptionalism is “a double-edged sword.”

Political movements that run afoul of these individualistic, achievement-oriented values rarely prosper. The Democratic Party is now divided between moderates — who emphasize individual responsibility and education to ameliorate inequality — and progressive populists, who advocate an activist state that will protect people from forces beyond their control. Given the deep forces in American history, the centrists will almost certainly win out.

Indeed, the most amazing thing about the past week is how modest the Democratic agenda has been. Democrats have been out of power in Congress for 12 years. They finally get a chance to legislate and they push through a series of small proposals that are little pebbles compared to the vast economic problems they described during the campaign.

They grasp the realities Marty Lipset described. They understand that in the face of inequality, Americans have usually opted for policies that offer more opportunity, not those emphasizing security or redistribution. American domestic policy is drifting leftward, but there are sharp limits on how far it will go.

It’s hard to argue with Brooks if you accept how he frames the issues. America is more conservative that other advanced economies. We and South Africa, for example, are the only nations that lack some form of socialized medicine (well, an official form of socialized medicine. We do have one. It’s called emergency rooms, and they are such a costly and inefficient way to provide health care to the uninsured that it puts our per capita health care costs well above that of other countries that have state-financed health schemes).

But if you read his piece in isolation, you’d believe that America’s current state of affairs is the inevitable result of libertarian economic values and an unequal distribution of talent and training. Reality is more complicated than that.

First, despite his argument (accurate) that Americans on the whole favor equality of opportunity over equality of results, Americans are also leery of undue concentrations of power and wealth, recognizing that they skew the game unfairly towards the advantaged. Periodically, popular sentiment becomes so strong that laws are enacted to curtail the influence of those at the top of the financial heap. President Andrew Jackson effectively the Second National Bank by vetoing the reauthorization of its federal charter and pulling out funds. His reasoning? It represented an excessive concentration of power, served to enrich the wealthy, and had too much influence over Congress. President Theodore Roosevelt was a trust buster and ran on the theme of the “,” promising regulation (including that of food and drug safety) to protect the little guy. Populist Bob La Follette won 17% of the national vote in the 1924 presidential elections. Similarly, FDR’s work and income redistribution programs weren’t motivated simply by the need to get the country out of its dire economic shape. It was also to weaken the growing populalrity of Huey Long, who was advocating far more radical programs, by implementing a watered-down version of his agenda.

So it isn’t accurate to paint Americans as having an unwavering belief in equality of opportunity. There has been considerable back and forth in the nation’s history as to the proper role of free markets, versus the need for the state to intervene to keep the game fair, or at least prevent it from becoming grossly unfair.

The pronounced shift in income and wealth concentration in recent years, for example, can’t be explained simply by those with natural advantages (read smarter, harder working, better educated) doing better. Favorable tax law changes and a rising tide of liquidity (which have kept asset prices high, favoring capital owners over labor sellers) have played a big role as well. And while the public at large may not understand how the rich have gotten so much richer, they can see that the people at the top increasingly live in castle-like homes, fly on private jets, buy mega yachts, in short, enjoy a standard of living unheard of even a generation ago, while their incomes have been largely stagnant, and many work harder than before (for example, there are fewer stay-at-home moms that there were 20 years ago because most families need the second income). Visibly unfair results undermine popular support for limited regulation and income transfers. But many at the top have lost their sense of noblesse oblige, so if there is a backlash, they have no one to blame but themselves.

It is also interesting that Brooks cites a 1996 study by Lipset that shows broad scale support for American business. This survey took place before the accounting scandals of the 2000 to 2002 period, options backdating by CEOs, and continuing press critical of CEO pay. As in the trust-busting days, if companies appear to be operating out of only narrow self interest, or worse, the interests of the CEO and board, it’s not hard to imagine that support for corporations will erode. The popularity of Eliot Spitzer, our era’s answer to “Fighting Bob” La Follette, may be a harbinger of changing sentiment.

And the specter of Democrats putting forward a watered-down agenda? That may be due to fiscal rather than ideological pragmatism. It’s hard to legislate reform if you can’t find a way to pay for it.

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