For decades in the 20th century, the level of economic inequality in the United States was higher than that found in other Western democracies. Even so, it was on the same spectrum, and displayed greater economic mobility as well, with individuals moving between classes with impressive speed. Now, as Timothy Noah writes in his essential new book The Great Divergence, the US has a level of inequality greater than found in Nicaragua, Guyana, or Venezuela, nations that most Americans would be ashamed to consider competitors.
How did this happen? How did America end up with Third World levels of inequality? Noah, a journalist at The New Republic and formerly with Slate, synthesizes the work of economics, political scientists, and sociologists to explain the process. “What impressed me most in researching the Great Divergence wasn’t how much disagreement there was among the experts, but how much consensus,” he writes.
Noah begins by explaining how inequality began to be measured during the Progressive Era, when the social sciences came into their own and academics believed experts could remedy society’s ills. Economists have documented that from the 1930s to the 1970s, the American middle class grew while the poor and rich classes shrunk as a percentage of the population. Around the early 1970s, however, this development reversed. “Median income, which more than doubled between 1947 and 1973, would rise by less than one quarter between 1973 and 2004,” Noah writes.
He runs through the usual suspects offered as explanations for this troubling state of affairs. First he reasons that Americans believe their society is relatively equal and that individuals have the power to become rich, and so are reluctant to embrace government policies that would lubricate social mobility. He looks at the effects of women entering the workforce in large numbers after World War II, which diminished economic opportunities for working-class men. Though women’s increased presence in the labor force has obviously been a boon to women, social justice, and society in general, it has destabilized the middle class.
Now families depend on two incomes, and so are at twice the risk of job losses. High-income women and men are marrying, while those of low income are doing the same. Finally, the rise of single parenthood has made the two-parent family twice as economically sound.
Noah also concludes that immigration is a contributing factor, as illegal and legal immigrants drive down wages and take jobs that would otherwise go to unskilled American workers. The failure of the American public school system, and the increased cost of college, has exacerbated the problem. Offshoring, the process by which American companies opt to use cheap labor in foreign countries, has devastated American manufacturing. Computerization of many formerly middle-class jobs, government policies that remove tax barriers to the rich, and the growth of the financial sector have all strongly contributed to economic inequality, according to "The Great Divergence."
Why does all this matter? In perhaps the most fascinating chapter in the book, Noah demonstrates that while some economic inequality is inevitable and to be welcomed in a dynamic capitalist society, the level of that inequality is now deeply detrimental to American democracy. When upward mobility is viewed as impossible and society is perceived as unfair, discontent and alienation are the results. The Occupy and Tea Party Movements can be seen as symptoms of this dissatisfaction. In addition, the rich and the poor are less likely to interact, essentially dividing America into two separate countries.
Finally, Noah offers a series of convincing, balanced and thoughtful – if politically unrealistic – solutions to the disappearance of the middle class. Increasing taxes on the rich and enlarging the government payroll; importing more skilled labor; universalizing preschool; imposing price control on colleges and universities; regulating Wall Street and revitalizing the labor movement – cumulatively, these policies would do a great deal to revive the American dream for most Americans. They may seem long-term solutions to what is already an alarming problem. But as Noah concludes in the final sentence in his accessible, erudite book, “The worst thing we could do to the Great Divergence is get used to it.” The problem is that most Americans seem to be doing just that.
Jordan Michael Smith is a Contributing Writer at Salon and a frequent contributor to the Monitor.