Monday, February 05, 2007

The new inequality

With John Edwards the dark horse candidate in the 2008 Democratic presidential contest, we'll be hearing a lot more in the next two years about "two Americas" and the "new" inequality/poverty. (Edwards himself isn't a po' tiller of the soil, of course, but a wealthy trial lawyer. His very large new house could probably fill at least one of those Americas.) This might be a good thing - but it might not, depending on the degree of honesty in what we hear. The Edwards rhetoric is, in part, about connecting the new inequality/poverty with globalization, but that relationship is loose and only a very recent development.

Conservatives (with some exceptions) are uncomfortable talking about poverty and inequality, while liberals love to talk about this pair of issues. They would be less happy talking about them if the issues were discussed honestly. Contrary to the impression you get from the media, inequality didn't magically appear under Reagan, disappear under Clinton, then magically reappear under Bush Jr. The new inequality started in the late 1960s, following four decades of growing equality after the 1929 crash and the Great Depression, and has been growing (at an uneven pace) ever since.

Inequality and poverty are not the same thing. Europe is often compared favorably with the US on these issues, but a better comparison is not country by country, but across the whole European continent. Then the picture is more like the US, at least in terms of poverty. Inequality is still significantly higher here and is largely due to the dynamism of the American economy - lots of new millionaires and billionaires have been minted in the last 20 years.

The best source on the "new" inequality and the related decline of urban life in the US is the great City Journal, published by New York's Manhattan Institute. The new inequality/poverty of the last forty years is driven by three trends. Two of them are rooted in changing family patterns, which reminds us - pace liberals and feminists - the family is still the single most important economic institution and, in some ways, more important than ever.

The first is the broken family/marriage caste revolution, a mixture of moral anarchy, the equalization of education and marriage between men and women, and bad welfare policies. It's the mix of these three, not any one, that set this trend is motion. This problem started in the late 60s, ran its course through the late 80s, and lately has been partly reversed by welfare reform. But it remains the single largest cause of child poverty. There are fewer teen mothers now, but single/working poor mothers now seem to be a permanent feature of our social landscape. Children of unmarried mothers are far more likely to repeat the behavior.

The Manhattan Institute's Myron Magnet and Kay Hymowitz have written on this development in their respective books, The Dream and the Nightmare and Marriage and Caste in America. Hymowitz is interviewed in this podcast.

The second trend is the decay of high school education and the large achievement gap that opened up between the college-educated and non-college-educated in the 70s and 80s. This phenomenon is no longer new and not as big a deal as it was 30 years ago. But it remains the largest factor in limited opportunities for working-age males and intact working-class families.

This second cause interacts strongly with the first to highten inequality. There's a strong correlation between being working or lower-middle class and having an education that stops at high school, on the one hand, and being middle or upper-middle class and having an education that extends to college and possibly beyond. This fact lays the ground for the strong assortative mating or homogamy trend of the last 30 years, whereby doctors don't marry nurses - they marry other doctors; and so on. Combined with the effects of single motherhood and feminism, this trend encapsulated most of the growing inequality of the 70s, 80s, and 90s.

This somewhat tongue-in-cheek but ultimately quite serious article from the Daily Telegraph documents the British case, but the dynamic is similar in the US. The trend started here about a generation earlier than in the UK.

The third cause is illegal immigration - to put it in political/legal terms - or - to put it in economic terms - unskilled immigration. This is the major new factor that has reversed the good poverty and inequality trends that started in the late 80s. This cause is fairly recent and became strong only in the late 90s. But it's the sole reason for the large increase in poor people in the last decade and the main reason for increasing inequality. Essentially, we're importing very poor people without the skills to do much better.

The simplest way to see its effect is to view its impact geographically, in those states with the largest illegal/unskilled immigrant population. The resulting burden on local and state governments puts those cities and states, even in good economic times, in a difficult situation. Unskilled immigrants also drive down the wages of unskilled and semi-skilled Americans.

The third cause overlaps with the first two, inasmuch as virtually all illegal immigrants have little education and experience dramatic family breakdown once they move here.

The net result of these trends is a troubling self-perpetuating caste system, a two-track society. It makes liberals uncomfortable, but the reality is that having two parents matters; having a father matters; they impact education and the life chances of children, by far more than any other factor. Education in turn is the next biggest determinant of life chances.

Discussing illegal immigration also makes many people uncomfortable. Almost everyone has a reason not to. Libertarians and economic conservatives believe in "pure economic man," at least much of the time. Neoconservatives believe in limitless American opportunity, even for the unskilled, and have a sentimentalized picture of past waves of immigration. Liberals share this sentimentalized mythology and also view illegal immigrants as potential new Democratic voters.

Much of the rhetoric on poverty and inequality, when not connected with globalization, is stuck in concepts 40+ years out of date. The "old" poverty was largely rural poverty, what FDR meant in his 1936 inaugural address ("one-third of a nation ill-clad," etc.). It has shrunk markedly since the 1940s. A major mistake of American politics in the 1960s was assuming that poverty was mainly urban. Cities aren't incubators of poverty; they're places where poor people go to escape poverty. The basic problem was rural poverty - there's no poverty like rural poverty, because of the isolation it enforces. Economic opportunities are far better in metropolitan areas. But there is less social solidarity, and an advantage to rural poverty, in spite of its severe economic limits, is this social solidarity.

The "new" poverty, by contrast, is not rural or rooted in ancient class systems. It's urban or even suburban and a result of bad life choices, subpar education, and lack of skills. Real progress will be forthcoming when politicians start talking about why people should stop making bad life choices, about reforming public education, and about stopping illegal immigration. The last item is especially explosive, since it touches on the failure of the societies-of-origin to develop on their own. This was even an issue in the recent Mexican presidential election, an all-too-rare moment of honesty.

When politicians talk about poverty and inequality, grade them on the degree of their honesty concerning these three trends. For that matter, grade the media the same way - and buyer beware.

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