Tyler Cowen has an excellent column suggesting that while the past thirty years has indeed been tough for the American middle class, it has also realized astonishing improvements in the living standards of the global poor. Primarily China, and to a lesser extent its neighbor India, have together brought hundreds of millions out of poverty and malnourishment. Surely this is more important than the stagnation of (an already extraordinarily high) income in the western world.
In any way you slice it, the world is becoming a more egalitarian place. Indeed, it is probably the single-fastest restructuring of international economic hierarchy in the modern era. China’s urban upper-middle class is effectively as well-off as America’s lower-middle class. There used to be a time, not so long ago, that the United States could boast it would be better to be born dirt poor here than with a silver spoon anywhere else.
Tyler posits the story as the tension amid between and within country inequality. And he at least implies the enlightened western mind should focus on the success of the former as at least an order of magnitude more important than the failure of the latter. I am not inclined to disagree.
The real story here is really not about inequality. It’s about living standards, and that tells us something about the futile conversation America has had on inequality within its own borders. For example, the research behind Tyler’s column, suggests that global Gini inequality did indeed fall: from 72.2 to 70.5.
Sure that’s something – especially given that North-South inequality had been increasing for the years before – but it’s certainly nothing incredible. Because two big things happened over that time: the international poor crawled into the middle class, and the global one percent pulled further away.
The former still dominates the latter, but the net effect is a lot less impressive. That can mean one of two things. Either the last thirty years have not been as amazing as everyone thinks, or a change in inequality is not the correct lens through which to view the transformation.
I don’t think anyone would go with the former. But this can be extended to the United States as well. I don’t pretend that inequality doesn’t matter, but the real question America has to deal with is an erosion of living standards at the fringes.
And many times these have nothing to do with economic inequality. For example, consider the incredible disutility caused by America’s racist, aggressive, expensive, and futile criminal justice system. Indeed, incarcerating millions of black people every year for smoking crack and pot, and forcing them into penal labor, isn’t pretty far from modern-day slavery.
Or what about the post-industrial ghost towns scattered across Appalachia where unemployed families bond over crystal meth? This contributes to inequality, but only analogously to the poor Indian farmer of 1980. That is to say, the more the only even remotely-sensible political platform in town (the Democratic Party – whether you want to accept it or not) keeps screaming about increasing taxes on the one percent by one percent, as a solution to everything from runaway deficits to inequality, those who are truly suffering miss out on any and all political representation.
America’s criminal justice system has been a heinous crime – and that is blatantly obvious to anyone with a heart – for over a decade. But it takes a libertarian and a man who lived in the Newark slums to do something about it. Democrats, the supposed party of opportunity and progress, have had basically nothing to say about the clearest cause of systematic suffering in the country.
And immigration reform is a close second, yet the party’s effective nominee has clearly hawkish views about sending kids who came into this country back to gang-ridden Central America.
They still have the audacity to claim they champion the poor man’s cause.
To the extent the narrow definition of inequality is the primary avenue to achieve this end, maybe they do. After all, Democrats have had basically nothing new to say about the subject than increasing the capital gains tax, and adding a new top rate at 40%. Or was it 50%?
It’s time that we started talking about living standards. And this may alleviate inequality in the long-run, but just like the reduction of the global Gini by 2 points, that won’t be the main story. Instead, over the next thirty years we’ll see an increasingly large share of the income go towards those the top quartile. And before we talk about taxing them more, let’s talk about how we want to spend that revenue most effectively in improving the broad welfare of the country.
Call be a tax-and-spend liberal, but let’s at least start talking about the “spend”.