The Great Disconnect

Paul Krugman's recent long essay in the Sunday Times magazine criticized the economics profession for its failure to see the bursting of the housing bubble and the onset of the Great Recession. There are several factors which contributed to this failure, but one that Krugman focuses on is an ideological one: that over the past thirty years or so, economists were in thrall to the notion that markets are, essentially, always right, embracing anew a way of thinking about capitalism as a nearly perfect system that had, itself, been discredited by the Great Depression and the work of John Maynard Keynes.

This renewed embrace of the near-perfection of markets coincided with a period known as the Great Moderation, where intelligently applied monetary policy, administered by sage central bankers (notably Alan Greenspan), ensured a relative smoothing out of the business cycle, paving the way for steady growth that ensured continual economic progress:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn't sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets -- especially financial markets -- that can cause the economy's operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don't believe in regulation.

But there's another element here that Krugman largely overlooks, what one might call the Great Disconnect. The intellectual elites most influencing public debate about social policy (including the current health care debate) are, in no precise order, journalists (especially elite pundits), economists (economics being by far the most prestigious branch of academic social science) business leaders and, of course, lawmakers themselves. And all of those groups have one thing in common: they have prospered mightily over the past thirty years or so, while the typical American worker has not, with salary and benefits that place them, on average, at or near the top of the American income distribution.

Testifying in 2007 before the Senate HELP committee, Eileen Applebaum of the Center for Economic and Policy Research explained that:

The U.S. economy has experienced tremendous growth in the last 30 years. American workers today produce 70 percent more goods and services than they did at the end of the 1970s. There has been a dramatic increase in women's paid employment - especially in the employment of mothers of young children - as women have responded to both increased opportunities and increased financial pressures on families with greater attachment to the paid workforce. More women are working and working more hours than ever before. Workers have generated a huge increase in the size of the economic pie. As a country, America is much richer than it was a generation ago.

There is a problem with this picture, however. The overwhelming majority of American families haven't shared fairly in this bounty. Workers' pay and benefits have lagged far behind the increase in productivity. Families have struggled to make up the difference as wives' hours of work increased -- by about 500 hours since 1979 for middle income married couples with children. Family work hours have increased without benefit of affordable quality child care, paid sick days and family leave, or greater control over work schedules. The time squeeze on working families has grown sharper, especially now that baby boomers face the need to help aging parents as well as care for children. Despite working harder, America's families face greater stress and economic insecurity. The challenges are especially severe for single parent families, which today account for a quarter of all families with children.

As America has grown richer, inequality has increased. In 1979, the average income of the richest 5 percent of families was 11 times that of families in the bottom 20 percent. Today, the richest 5 percent of families enjoys an average income nearly 22 times that of families in the lowest quintile. Together, the top 5 percent of families receives more income than all of the families in the bottom 40 percent combined - 21 percent of total family income compared with 14 percent.

These realities have largely been lost in American political discourse, because the professional groups that most directly shape the national conversation over these issues are populated by people who live secure and often affluent lives that includes, among other things, rock-solid health insurance.

Thinking in sociological terms, it's not hard to understand how among these groups, ideas such as the "voluntary" nature of unemployment and lack of health insurance became fashionable and that, more broadly, their own experiences were extrapolable to the circumstances facing the typical American.

Once upon a time, the now hackish media critic Howard Kurtz wrote a pretty good book, Media Circus. Early on in the book, Kurtz explained some of the key failures of modern journalism. Central to Kurtz' analysis was a class-based explanation -- that journalism had been considered, at one time, a blue-collar profession, populated mostly by people from the working class, who saw as their job to "get city hall" and advocate on behalf of those who had the least access to the corridors of power. Kurtz argued that the professionalization of journalism, particularly from the 1970s forward (including the advent of journalism schools at elite institutions of higher education), had important implications for what journalists considered significant and urgent, as the economic distance between them and the public grew.

In sum, these professionals' own class interests (yes, I am generalizing) have militated against thinking in concrete terms about actual human suffering -- the devastation of losing a job, or how a factory shipped overseas could destroy a community, or a health catastrophe could engulf a family. Yes, we can read about such stories in the moving, affecting portraits that still appear in newspapers. But these stories tend to assume the tone of human interest pieces, often shorn of an analytical context and which bear increasingly little relationship to elite discourse about public policy. And this is due, at least in significant part, to the fact that the concerns and priorities that shape our national discourse overwhelmingly reflect the class position of the people who most influence that discourse. Hence, at a time of massive economic decline, resulting in concrete suffering for millions, much of our elite discourse is taken up with hectoring about deficit spending and inflation, despite the lack of evidence that these things really imperil our economy. This skewed perspective also persists in today's debate about health care reform, where the Sunday talk shows are filled with people who will never ever have to contemplate the consequences of a catastrophic health event on their family's economic well-being, talking in substance-free terms about things like the political viability of the public option, without ever stopping to explain why a public option might materially improve the lives of millions of ordinary people (and frequently without noting that, in spite of all the misinformation, a majority of the public still supports one).

Instead, we get the spectacle of people like Senator Olympia Snowe, the "moderate" Republican from Maine, enjoying the full benefits of government-funded health care -- and being treated with the utmost respect for her moderateness -- while insisting that only serious people such as herself realize that government-funded health insurance should not even be an option for the unwashed masses.

To borrow Christopher Lasch's phrase, what we've witnessed for thirty-odd years now is a revolt -- of the elites against the masses -- whether in journalism, or academia or in the corridors of political power. In this revolt, the elite professional strata most responsible for shaping our political and economic discourse have at once grown richer and, predictably, have increasingly articulated an ideological worldview justifying their privileged positions (Robert Frank's book, The Winner Take All Society, aptly captured many of these dynamics over a decade ago). The priorities they've articulated -- business-friendly economic policies (including a generally knee-jerk hostility to unionism and uncritical support for "free" trade), so-called moderation, centrism and prudence in addressing major social problems (with a tendency to focus on the necessity of individual behavioral changes and an aversion to significant government intervention in the economy except when it comes to bailing out major financial interests), a concern for bi-partisanship and civility in elite discourse -- make perfect sense for people who enjoy full material security and all of the perks associated with professional prestige and opportunity.

As for everybody else...

Jonathan Weiler's second book, Authoritarianism and Polarization in Contemporary American Politics, co-authored with Marc Hetherington, is just out from Cambridge University Press. He blogs daily about politics and sports at www.jonathanweiler.com

 

 

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Comments

[seawolf77]

Here are solutions. This is what they look like in case you missed it.
1) Start an immediate Docotr and Nurse Fund. Put in about 30 billion dollars and dole out 4% of that a year to train doctors from every part of the country. Then they go back and work for the government at $60,000.00 a year for 8 years. Then they can go practice where ever they like. Nurese get $40,000. Same deal. These are smart people, and believe me they are out there that can't afford college or can;t qualify for a loan.
2) Make candy and soda companies illegal. Halt all eating of sugar and immediately put all sugar into ethanol production. This would substantially affect public health to the good and reduce or dependence on foreign oil.
3) Provide a basic health care package with a minimum of services but mostly all prevemtitive and almosy none selective. Provide this at an attractive rate for services provided vis a vis $3800 a year and you get to go to the doctor and dentist when you need to and it only costs $50 bucks, unless it is serious.

[DasBoot]

The other day on MSNBC's Morning Joe, they had an interview with Michael Eric Dyson and agreed that racial prejudice needs to be called out. What does Maria Bartiromo say? "And class warfare!"

There has been class warfare indeed, but top down, and for the last forty years.

[textynn]

Moore says that the top 1% own more of the country's wealth than the other 98% . I quit subscribing to cable tv because the people on tv had life styles that were completely foreign to me. Twenty somethings living in apartments that would go for ten thousand a month in real life. People always getting high paying jobs while they are still wet behind the ears, People wearing designer clothes and cars and participating in high buck recreation. The only people that usually looked or lived like I do are criminals or low life characters. That's not true of sitcoms which are designed for average people, but it seems to be almost exclusively true in night time tv and esp talk shows. Shows like "Today" showing ten thousand dollar Louie Vetton bags and such just rub me the wrong way.

Then we have people like Max Baucus who want to fine people almost 4 thousand dollars for not having medical insurance when they can't afford it. It's actually laughable if is wasn't so ignorant and so callous. "The Other" America is most of us.

[seawolf77]

The simple and plain fact of the matter is you are already paying this money out at the rate of $2000/ hour in ER rooms across the country. We even glorify this insanity with TV shows that show Americans at their worst being saved by doctors, heroic and handsome but nuanced like you and me of course, while watching their sordid personal lives for our entertainment. What this bill does is spend that money another way, a better way. If you can't understand that you can;t understand anything.

[textynn]

I understand that good people are being priced out of the market. I also know that your statement makes absolutely no sense at all. Spend what money a better way? The 4K that Baucus wants to extort from poor people.

People like you want it both ways. You want to justify low wages that business across the board get away with to make high profits and then tell those wage earners that they are a drain on the system and they deserve to suffer or be fined. Some of these people will have to stand on street corners to come up with money for Health care premiums at the crappy wages that so many employers enjoy. But that's what people are fighting for because slave labor has always been the number one reason for screaming about others being a drain and it usually the people doing the back breaking work that get to be accused of being a drain. Same story different day. You load 15 tons what do you get... another day older and deeper in debt. St. Peter don't you ya call me cause I can't come. I owe Max Baucus half my income.

[themainpoint]

Great , original post.

One nitpick here.

"The intellectual elites most influencing public debate about social policy (including the current health care debate) are, in no precise order, journalists (especially elite pundits)..."

I find the characterization of the great majority today's journalists and pundits as "intellectual" almost funny. (if "intellectual" means someone who is a reason-based, truth seeker who avoids misinformation and sensationalism, questions intelligently, gathers all facts and looks at all sides and is so naturally curious that they gather deep knowledge)

It seems to me that any willing dishonest intellectual or non-intellectual can repeat what is expected and whatever brings in the most dough in today's media. It doesn't take a deep thinker to figure out the boundaries of the controlled discussion these folks must color within to keep their jobs.

I see many of today's pundits and journalists as more on par with the national enquirer reporters than intellectuals or journalists.

I hear little spontaneous, creative or original thinking coming from most pundits and journalists. Instead, it is often a dry, stinted and controlled discussion with almost no hardball questions and many transparent blips that reveal an astonishing lack of depth and knowledge.

I'm sure most "get it" and know they what s expected or they wouldn't be working, but they don't really even seem to get what it is they are getting. Get it? :) (long day)

[DasBoot]

Agreed. Almost as a general rule, so called free markets lead to greater inequality. But in this country it is possible to never notice the masses of the poor, because we are segregated not only by race, but also by class.

The humanities share in this as well. Class-based history, for example, was not very prominent in the cultural history of the last generation, with exceptions of course.

[DosGatos2]

Excellent article, Jonathan.

Because Repubs were in power for so long, I think becoming a Republcan was aspirational for some, and once they thought they had arrived, they turned their backs on the Democratic Party.

Two cases in point:

I have a friend who grew up working class and used the benefits of a developed society (good schools, libraries, roads, etc.) to become upwardly mobile. Today, this same person has totally forgotten what role the contributions of others made in his success. He goes on about free market ideology and "personal responsibility". When I point out that the infrastructure he is unwilling to pay for today is the same infrastructure he used to escape the working class, all I get is a blank stare. When I point out the differences between the characters in Ayn Rands' novels and the real world--he insists on defending his ideology.

Another friend, an evangelical, is so hard-hearted about the plight of the poor that it makes me wonder what is taught in her church. Recently laid off from a job, she needed anti-depressants for awhile to cope and family had to help her out financially but she cannot understand why the poor don't just get up and find jobs. She is unable to see that not everyone can tap the Bank of Mom and Dad and maybe, being poor is depressing.

All the selfishness and cluelessness is very sad.

[PlaceboStudman]

Sometimes the disconnect comes from trying to do too much at once. This leads to complete dishonesty from our politicians and a complete distrust by the people. Although we have not even come close to reaching this point yet, I suspect people's disconnect will reconnect in about 20 years, when they realize that, yet again, something that was called Health Care did absolutely nothing to save lives or reducing suffering. That IS what Health Care does, and yet, that is not what anyone is focusing on, while calling it Health Care.

Are people really THAT surprised that people are angry and dismayed and ashamed that our politicians are putting people to their deaths so that others can save a buck or two?

[Arion]

Beginning in the 90s I saw my own kids grow into a progressivism that included feminism, gay rights,the environment and so forth, but absolutely no interest in poverty or the workers. This mystified and troubled me. It seemed like a progressivism with no heart. They've gone on to careers placing them pretty close to the top of the pole.Same liberal politics, same indifference to blue collar and people in poverty. What the hell is going on?

[inmyhumbleopinion]

Terrific perspective and one that should get more attention.

[timm0]

I'd humbly suggest that there is a deeper layer beneath your description of the disconnect more fundamentally driving the effect you describe. And that is media corporatism.

The media, whose visible, on-screen elements you've very clearly described, are just the veneer. The corporations who have literally and figuratively purchased "the fourth estate," have the agenda, the means, and the motivation to move and cheer-lead as the income distribution goes from 11 times to 22 times and if they can, to 100 times. THEY are the problems.

The pundits and the Ken and Barbie dolls aren't driving the agenda and the wedge between haves and have nots as much as they are willing and easily motivated (due to the financial benefits derived from the advertising loot) accomplices in a sick, warped, and ultimately self-defeating fraud. The media conglomerates control the message - it's intensity, frequency, and "analysis." The campaign money helps keep the FCC out of the way. And on goes the game.

[DotCommie]

Few people realize that newspaper publishers and tv executives are nothing more than MBAs who have never worked a day inside a newsroom. The poor quality of journalism, especially on the local level, reflects their contempt for courageous, crusading journalism.

[picaman]

What stirkes me is the complete lack of empathy that is so oftten displayed by the wealthy toward the poor.

It is one thing not to share the experiences that the poor experience, but the utter lack of empathy and outright contempt is harrowing.

It is assumed that if you are not wealthy then you are "lazy" or "lack initiative" being born into socio-economic sircumstances that stack the deck against you is never considered as a probable cause.

Sadly, these beliefs and attitudes are often held by self professed Christians!

[picaman]

PLZ forgive spelling or lack thereof... fingers faster than brain...

[timm0]

To some measurable degree, tho I haven't measured it myself due to the scale required, some of the "Christian" outlook toward the poor is based on blind faith in other subtle ways. Specifically, those who would otherwise be distraught over the plight of others purposefully replace empathy with apathy. In a phrase, "god will help them."

Another is a feeling that a god will reward them with tangible things if they are "good." So the rich people (and even non-rich people!!!!... which I just can't wrap my brain around...) equate wealth with goodness. In a phrase, "god has chosen to reward my goodness with prosperity and if someone doesn't have prosperity, it's because god hates them... and why would I ever want to help someone hated by god?"

Sick.

[picaman]

Excellent points, this would make an interesting study/survey/poll.

[chazmanr]

You make good points. However, the attitude you describe is not new. It is recycled. Does anyone remember the Puritans and the notion of 'predetermination' from their US history books. It is the same ideology being followed today.

[Sundialsvc4]

"If they are about to die, then they had better do it, and rid the world of its surplus population ..."

[textynn]

Its just a formula for discriminating and justifying taking advantage of people. My supervisor cut every body's hours over a few years very drastically. Then she had the nerve to say to a couple of us that we were dressing too casual and our cars looked bad and why didn't we get our nails done from time to time. I was down to about $700 a month at this point and my work load was the same as when I was earning three times that much. I made the statement, if you've got the money, Ive got the time. She wasn't pleased. Her pay, of course, was never cut as she did the department's budget.

[greyhound2]

Let them eat cake.

[Sundialsvc4]

To your excellent article I would add that there is another aspect to this story: "Organized Crime."

Our Constitution says (Article 2, Section 4) that "any civil officer" "shall be removed from office" ... for "high crimes" ... specifically including two: (1) treason; (2) bribery.

It doesn't say "campaign contribution." It doesn't say "lobby." It says "bribe."

Well-organized criminal elements used bribery to allow them to reconstruct the same system that brought on the Great Depression ... perversely, to their own immense profit at that time. They brought the ancient scourge of Usury to Everyman. Through outright securities fraud (which continues, ostensibly graded "AAA+"), they have gambled their way to meaninglessly-large amounts of computerized dollars backed by equally meaningless-in-the-real-world public debt.

This narcissistic excuse for a financial system no longer serves its three essential public purposes -- banking, finance, and insurance -- nor does it seem to particularly care to. Fueled by literally millions of dollars a day in bribes, a small group of less than 600 individuals seems perfectly content to have, literally, betrayed 307 million others, making Plaintiffs out of one and all.

This angle on the problem, alongside your own, must not be overlooked ... nor referred-to by euphemism.

[JScott]

And let's not forget legislation that consolidated the media of all kinds thus reducing the outlets for differing viewpoints. It narrowed the civil (and uncivil) public discourse.

[mcmchugh99]

Historians like me rarely shared in the elite consensus on free market capitalism in the Second Gilded Age of the last 30 years. We knew all about Gilded Ages, and how they had crashed before and ended in depressions. How economists could not have known something that any student in an introductory history course would know is beyond me.

We historians know these things go in cycles, and that conservative era are always followed by reform cycles, like we're in now. The Gilded Age elites who had seemed like masters of the universe such a short time before, ended up looking like silly incompetents and Hebert Hoover's once the depression hit. That's what they look like today.

[Sundialsvc4]

And the element of crime was there then, too.

[Weirdo]

What kind of historian are you?

[classicalgeek]

Starting with the Hanseatic League, through the South Seas bubble, the Tulip Bulb crisis, etc. etc., the boom/bust cycle has permeated history and the signs are always there. I'm just an amateur historian (specializing in the middle ages), and we're always locking the barn door after the horse has flown the coop, to mix a metaphor :) We're always regulating to prevent the latest cycle, rather than the next one.

Any student of history could tell you that the unfettered free market doesn't work because people are not solely rational, but driven by greed, desire, fear, longing, and dozens of other motives when it comes to economic decisions. For organisms that desire so much homeostasis at the microcosm, you'd think we would apply it to the macrocosm.