Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00 In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle [...]
Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00
In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle class blame Congress than they do President Obama for their perceived difficulty in maintaining their standard of living. Most alarming, and one which likely will have an impact on this year’s elections, is the fact that median net worth took a nosedive during the Great Recession, plunging from $152,950 to $93,150. Furthermore, whether today’s college graduates, many of whom are underemployed and are living back at home with their parents, will achieve the trappings of middle class status anytime soon remains uncertain. One suspects we may be witnessing the emergence of the American equivalent of Japan’s Lost Generation.
Fortunately, however, we might comfort ourselves by knowing that the United States remains a land rich in opportunity much as it was in the past, unique among nations in its lack of a rigid class structure and its social mobility. But we’d be deceiving ourselves. In The Great Divergence, Timothy Noah of The New Republic posits that, since 1979, there has been a “particularly extreme” divergence in income inequality in the United States. Noah synthesizes the work of economists, political scientists, and sociologists to argue that income inequality has increased, and that this is not good for American society. In the book’s final chapter, he advocates specific actions and policies that he believes would help reverse this trend. His suggestions are largely politically progressive proposals, including increasing taxes on the super-rich, bolstering the federal workforce, and breaking up the too-large-to-fail banks. While there are likely some conservative-libertarian policy wonks that would be amenable to his proposal to break up the large banks, few would likely support Noah’s proposal to revive organized labor.
The author takes the title of the work comes from a phrase used by Paul Krugman, an outspoken advocate for Keynesian stimulus, in his 2007 book, The Conscience of a Liberal. Noah defines the Great Divergence as a socio-economic phenomenon as one not primarily involving the poor. Rather, it “is about the difference between how people lived during the half century preceding 1979 and how they lived during the three decades after 1979.” The story he tells, however, is not just about income inequality; it is about diminishing access to the top. According to Noah, over the past several decades, opportunities for upward social mobility have not increased.
Unlike some pundits who rehash talking points, Noah commendably cites ample scholarship to support his claim. In The Great Divergence, the reader learns that the United States now offers its citizens less intergenerational economic mobility than northern and western European nations. (I would venture, however, that the United States still allows for greater social mobility for children of first-generation immigrants than do Scandinavian and other western European countries.) Noah also highlights an intriguing sociological finding which indicates that Americans tend to overestimate the degree to which American society fosters upward socio-economic mobility.
Notable within the pages of The Great Divergence then is the fact that Noah challenges Paul Ryan for an October 2011 speech in which the Wisconsin Congressman contrasted what he perceived to be American social mobility with a rigid European welfare state class structure. Ryan, according to Noah, “had it exactly backward.” In truth, European countries now offer more social mobility than the United States. While Noah penned his study of income inequality prior to Mitt Romney’s choosing Ryan as his running mate, The Great Divergence takes on a more salient political implication in this new found context.
So what caused the Great Divergence? According to Noah, the Great Divergence did not result from prejudice against African-Americans or women. The failure of the American educational system to meet the demand for higher skilled workers is part of the story, as is trade with low-wage nations such as China and the increase of business lobbying in Washington. The decline of organized labor also played a role. Noah also refers to the rise of extremely wealthy (“stinking rich,” in his parlance) as a “separate and distinct phenomenon” that can be thought of as “the Great Divergence, Part 2.” The last several decades have been witness to the emergence of what are, in essence, new social classes within the top 1%, namely the top 0.1% and the top 0.01%. Wall Street, according to Noah, played a substantial role in the emergence of these extremely wealthy individuals. Top income shares are rising faster in the United States than in other developed countries.
Overall, Noah may succeed in persuading the reader in that income inequality not only is on the rise and that it is problematic for society. He is less convincing in his policy proposals to remedy the situation. To be fair, he does rightly acknowledge that many of his proposals, many of which are further to the left than President Obama, are not “politically salable today.” Noah could have bolstered his work, and perhaps the reception to it, had he offered a list of concrete and specific policies that would both reverse income inequality and be palatable to a large slice of the American electorate. The work also suffers from the fact that it is largely a summary of other scholars’ work, much of it very technical, making it less accessible to a general audience that it deserves to be.
In conclusion, one can think of The Great Divergence as a plea to the American public to recognize that income inequality is a problem. It is also to acknowledge that social mobility is no longer operating the way in which it used to. I would contend that the frustration that many Americans feel with Washington in many ways reflects the fact that the system is not producing the same results as it did for people’s parents and grandparents. Income inequality currently is a topic of concern among the country’s economists, political activists, and pundits. Whether it will be a broadly discussed national concern remains to be seen. It would be heartening to see at least one moderator in the upcoming presidential debates ask each of the candidates where they stood on the topic of income inequality.
Jonathan Eric Lewis (c) 2012
Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00 When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and [...]
Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00
When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and confidence about the nation’s long-term fiscal prospects hovered somewhere between hope and despair. To his significant advantage, President Obama did enter the White House with Democrat majorities in both the House and Senate. Although the former Illinois Senator’s supporters did not necessarily know it at the time of the new president’s inauguration, the first two years of the Obama Presidency would be crucial years for the country’s recovery from the worst economic downturn since the Great Depression. For decades to come, historians will debate whether President Obama helped or hindered what, in fact, would prove to be an anemic recovery from the near meltdown of the American financial sector.
In The Escape Artists: How Obama’s Team Fumbled the Recovery, Noam Scheiber provides a comprehensive narrative detailing the personalities and policies of the Obama economic team. He argues that President Obama and his team made a mistake in focusing on deficit reduction, rather than putting jobs foremost on the agenda. A senior editor at The New Republic and a Schwartz Fellow at the New America Foundation, Scheiber posits that while it is certainly the case that, “Team Obama helped avert catastrophe,” they nevertheless failed in their self-appointed task of restoring the economy to close to where it was prior to the financial crisis.
Readers most interested in the personalities behind the recovery will find much to appreciate in Scheiber’s extremely well researched book. Although he treats the complex economic issues with dexterity, Scheiber focuses his attention on the educational, personal, and professional backgrounds of the major players on Obama’s economic team than on complex and nuanced economic and legal issues. He devotes individual chapters to differing members of Team Obama, including Larry Summers of the National Economic Council, Treasury Secretary Tim Geithner, and Gary Gensler of the Commodities Futures Trading Commission (CFTC).
Overall, Scheiber is successful in documenting how the personal backgrounds of the key players on Obama’s economic team affected their policy decisions during their tenures in the administration. Occasionally, however, Scheiber’s narrative goes slightly off course. This is never more the case when, perhaps in an attempt to be comprehensive, he seemingly diverts his attention from the topic at hand. There are sections in the work where Scheiber spends perhaps too much time detailing some of the interesting, albeit not immediately relevant, details about the aforementioned personalities. One such case in point is a detailed discussion of Larry Summers’ childhood and high school years, which could easily have been condensed into two short paragraphs.
When he is at his best, however, Scheiber provides a fascinating look at the decision-making process of Obama’s economic team. This includes the numerous, and sometimes colorful, internal squabbles within the West Wing and other agencies and departments. Scheiber recounts how Christina Romer of the Council of Economic Advisers (CEA) had advocated for a larger stimulus package than the one that eventually was put into place is perhaps well known, details the tensions between Summers and Geithner, and recounts the different personalities and policy views of those tasked with deciding how to regulate derivatives, for instance, in the wake of the crisis.
Scheiber does, however, devote significant attention to Treasury Secretary Tim Geithner’s career and policy decisions. The reader learns how Geithner’s years overseas, first in his youth and then early in his career at Treasury, shaped his worldview. According to the author, Geithner’s approach, describing as a “willingness to set aside concern for appearances and keep kicking dirt on the fire until he smothered it,” is probably responsible for saving the financial system. On the other hand, recounts Scheiber, the bailouts really demonstrated how deeply embedded both personally and professionally Geithner was in the financial world.
As for President Obama himself, Scheiber portrays him as an idealistic politician who both sought bipartisanship on economic matters and was committed to his health care agenda, but was ultimately faced with an intransigent Republican opposition. For those readers who think that only Congressional Republicans cared about the deficit, The Escape Artists will provide a different perspective. In fact, Scheiber contends that Obama was too focused on deficit reduction. This, according to the author, played into the Republicans’ hands, as if to concede the point that the larger American public was most concerned with cutting spending. “By agreeing that deficits were the biggest threat to the economy,” he writes, “the president lent credence to the fallacious argument that cutting breeds prosperity, which Republicans wielded against his efforts to secure more stimulus.” Scheiber’s own view, then, is more in line with Keynesianism than with the cutting spending crowd.
In conclusion, The Escape Artists is an enjoyable read detailing how President Obama and his advisers ultimately failed to revive the American economy. The book, however, sometimes does not live up to the very provocative subtitle regarding fumbling the recovery. Indeed, if one were to judge this book by its cover, one would think it was just another right-wing critique of the president. While Scheiber occasionally gets bogged down in details that detract from the overall flow of the larger narrative, he does provide a lucid study of how individuals, personality quirks and all, do ultimately shape policy. Scheiber thinks that the president should have focused more on jobs. Whether he will get a chance to do so in a second term is ultimately up for the voters to decide.
Jonathan Eric Lewis (c) 2012