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The American Dream Dies, Economic wolves on the prowl...

by andrethegiant Thu Apr 27th, 2006 at 11:38:05 AM EST

(This story is x-listed over at dKos.  I thought I should post it here because you folks here are constantly inspiring me with facts, figures and insights.  Many thanks.)

A few months ago I wrote about a Honduran woman I met trying to cross the border.  In Mexico, she had fallen off a train, had her leg crushed and been thrown in the bushes to die.  She was found, given medical care and a prosthesis, then shipped back to Honduras where the local company manager said she was too "f**ked up" to get a job.  Her alcoholic step-father said about the same.  So here she was in Tijuana telling me she was going to try to cross again and make her way to Boston.  She was young, tough, seemed smart, but--I couldn't help thinking--also a little delusional.  Eventually it occured to me (this was at the time of the mine tragedies earlier this year) that most Americans harbor similar illusions about America, particularly about class mobility here. Today a new Reuter's story explains this:"America may still think of itself as the land of opportunity, but the chances of living a rags-to-riches life are a lot lower than elsewhere in the world, according to a new study published on Wednesday".  


There is both hope and sadness in the fact that people, like hard-working fifth-generation miners, still cling to the American Dream, believing that sucess is unrelated to social connections, that hard work and grit alone will move you ahead.  The hope, in my opinion, is not just American, but human.  It's the belief, perhaps faith, that things can get better.  The sadness is the empty promise our economy holds out to most of those who have the dream.  And the hollowness of the Horatio Alger ideal has become especially true under the the Bush Administration, where the dream has descended to the point of cynical propaganda:

The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to "Understanding Mobility in America", a study by economist Tom Hertz from American University.

By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.

"In other words, the chances of getting rich are about 20 times higher if you are born rich than if you are born in a low-income family," he told an audience at the Center for American Progress, a liberal think-tank sponsoring the work.

He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.[Reuters]



While all of this will sound like America bashing.  That is not my intent.  I have travelled a lot and there are many things I love about my country, and, yes, the American psyche.  But a true accounting of the economic reality is necessary if we are to move ourselves and others forward and out from under the economic lies of trickle-down and finance-for-finance's-sake markets.  (Indeed, the Financial Times has yet another article on the dangerous levels pure finance has reached (it's behind the firewall).  Meanwhile, many good folks over at European Tribune have been posting on the American economy.  One of them, the inimitable Jérôme à Paris has posted this graph on income inequality:




No wonder the wealthiest aristocrats in America are seeking to end the estate tax.

Democrats for too long have shied away from discussing economic difference.  Democrats have been losing a lot of elections too.  An honest discussion of the economy is a vital step, not only in confronting the prejudices of our own economy, but in sponsoring a more democratic political sphere.  

Multi-Millionaires and billionaires band together to form lobbying to repeal the estate tax.  Millionaires and Billionaires stay at the same hotels, play golf at the same country clubs, sit on each other's corporate boards.  Yet these same people fight unionization and local coalitions.      Millionaires pay for representation in congress, but they do not want to let people leave work to vote.  

James Galbraith, in this month's Mother Jones says, in his own words, that what passes for modern economics is a broken theory.  He goes on to note how, in theory and practice, current economics fails us:

In a predatory economy, the rules imagined by the law and economics crowd don't apply. There's no market discipline. Predators compete not by following the rules but by breaking them. They take the business-school view of law: Rules are not designed to guide behavior but laid down to define the limits of unpunished conduct. Once one gets close to the line, stepping over it is easy. A predatory economy is criminogenic: It fosters and rewards criminal behavior.

Why don't markets provide the discipline? Why don't "reputation effects" secure good behavior? Economists have been slow to answer these questions, but now we have a full-blown theory in a book by my colleague William K. Black, The Best Way to Rob a Bank Is to Own One. Black was the lawyer/whistle-blower in the Savings and Loan and Keating Five scandals; he later took a degree in criminology. His theory of "control fraud" addresses the situation in which the leader of an organization uses his company as a "weapon" of fraud and a "shield" against prosecution--a situation with which law and economics cannot cope[http://www.motherjones.com/... ]



In other words, Galbraith's words, America has become a predator state, not only to Iraq or Central America, but to its own citizens.

My American dream is to see more Americans coming together to fight for their rights and for a fairer economy.  It is to see a real discussion of our real economy and all of its many, many shortcomings.  Indeed, what is far more inspiring than simple faith in some abstract "American Dream" that does not hold up to scrutiny is actually looking at all the crap that goes on, from Enron to Katrina to Iraq, and saying you've had enough of it and that you are going to fight. Luckily, a few "heterodox"(unorthodox) or "post-autistic" economists are looking at their own field with skepticism too.  

I don't know where we'll be 10 years from now, and I'm a realist about how long it will take to repair the damage (social and economic) of the past, but I do have one hope: the American Dream is dead, long live the American dream (you know, the democratic, egalitarian one).

[Updated for some clarity and spelling.]

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Thanks for posting this here, and for your generous comments about ET and Jerome.  I think I want to read your thoughtful post a few more times and comment, but wanted to pull out a few things right away.

First, I totally agree with your comments on getting rid of the inheritance tax.  I think the arguments to do away with it have some merit, the double taxation argument for example, but it is just unacceptable as social policy in America, IMO.  I still believe in the American dream, and people having the opportunity to improve themselves (more on this below), and I think this policy works against maintaining that dream.

Maybe a small quibble on this:

Multi-Millionaires and billionaires band together to form lobbying to repeal the estate tax.  Millionaires and Billionaires stay at the same hotels, play golf at the same country clubs, sit on each other's corporate boards.  Yet these same people fight unionization and local coalitions.      Millionaires pay for representation in congress, but they do not want to let people leave work to vote.
 I would just point out that there are many, many millionaires that disagree with this policy.  Two of the richest people in the world are against it--Bill Gates and Warren Buffet.  The Democratic party is filled with millionaires that I believe are against it--John Kerry and his wife (inherited money), I imagine all of the Kennedy clan, John Edwards (earned his money), the NJ governor and former head of Goldman Sachs (blanking on his name), just to mention a few well known millionaires opposed.  

My experience in knowing a few people in the millionaire category (not as millionaire as those above) is that they are somewhat united on the need to raise the inheritance tax levels somewhat significantly, since they were not adjusted for inflation over the years.  But I find most of them against abolishing this tax--admittedly a small sample size.

I also note, as I'm sure you know, that this bill expires in several years, so I believe in effect, it will have to be voted in again--and I'm hopeful that the ceilings for rates will be adjusted, but the overall policy and tax will be reinstated.

OK, let me say it before someone snarks my comment--this is in defense of millionaires????  I would say in defense of painting a group with a broad brush.

by wchurchill on Thu Apr 27th, 2006 at 03:34:02 PM EST
I agree that quite a few millionaires do want to keep the tax because they understand its importance in a democracy.  I wasn't terribly clear, but what I was shooting for was more the idea the upper-crust of the corporate class has many different ways to collude on issues because of the size and nature of their social network.  
by andrethegiant on Thu Apr 27th, 2006 at 06:52:54 PM EST
[ Parent ]
Great diary, Andy. And some great pointers. Here is the link to the report by Hertz for the CAP. Skimming through the overview, I picked this out that may be of interest to people here:

By international standards, the United States has an unusually low level of intergenerational mobility: our parents' income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.

Mobility, flexibility, they tell us : well yes, why not?

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Apr 27th, 2006 at 03:52:50 PM EST
First, I acknowledge that this would be a problem
He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.[Reuters]
and look forward to reading your links and understanding the data better.

But I think this does not correctly characterize the American dream:

The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to "Understanding Mobility in America", a study by economist Tom Hertz from American University.
if the intended implication is that an immigrant would move quickly into the top 5% of incomes in America, which I think would be + $150,000 annual income.  

I thought Poemless described the dream well

And to clarify for the Europeans, we were never taught that this just happens organically.  The American Dream did not exist in our psyches through sheer propaganda & mythology.  Sorry to burst your bubbles about that.  Fact is, a significant number of people in this country did become better off than their parents through hard work.  That is because their parents & grandparents were often here as refugees, from poverty, oppression or basic lack of opportunity.  Or as slaves.  So we're talking about starting with nothing but maybe a suitcase and a few contacts, and a few generations later ending up with assets like homes, accomplishments like university degrees, and relative independence to go where, associate with whomever, believe whatever they wanted......
The dream is a dream of families, and work over generations,,not a one shot jump into the top 5%.

But as I said above, I look forward to reviewing the comparative data on the US and other countries.

by wchurchill on Thu Apr 27th, 2006 at 04:13:47 PM EST
I wonder if Europe, Japan, and Canada are showing a similar proportional decline in mobility. I ask because I think one variable impacting this is the declining need for human labor - both physical and mental, stemming from ever increasing productivity gains through technology. It impacts all nations. For an extreme example, consider the vast numbers of 3rd world subsistence farmers who lost their land over the second half of the 20th century to be replaced by machine farming. Those people and their descendants aren't just poorer today, they're essentially excess humans (a very chilling concept) crammed into unimaginable squalor in 3rd world slums with little do do. They exist purely at the whims of the middle and upper classes, and in the most extreme cases, live exclusively off the waste energy of said classes (their garbage). Assuming a continual march of technology (certainly questionable but very possible) the same thing will eventually happen in the first world. In the US it's starting with the rural poor, who were being thrown under the bus in recent posts on the energy crisis.

Does anyone here know of any good research on this subject? It seems to me to be a remaking of human culture that is going largely unnoticed as most intellectuals devote their energy to the axis of nation state politics. Most intellectuals don't have a firm grasp on technology as it is.

you are the media you consume.

by MillMan (millguy at gmail) on Thu Apr 27th, 2006 at 11:15:14 PM EST
Interesting comment on the intellectual over emphasis on the nation state. Especily true when teh multi or the trans national corporations do not care too much about national borders as they can move their operations, headquarters and capital swiftly from one place to another in a very short period.
by observer393 on Thu Apr 27th, 2006 at 11:39:00 PM EST
[ Parent ]
fundamental contradiction of industrial capitalism...

improved effiency only understood as "takes less labour to make widget" ... never mind the amt of water or energy or raw material or toxic byproduct involved, labour is the only 'cost' that trad capitalists recognise -- sources are infinite, sinks are infinite, all supplies are substitutable, only labour is  a target for rigorous cheeseparing...

so taken to its logical conclusion, eventually it only takes 100 people to make all the Stuff everyone needs -- but if no one else has a job, how does anyone buy the Stuff that those incredibly productive 100 employed people can make?  oh yeah, the other 8 bio of us will sell lattes to those 100 people, or shine their shoes or something :-) in the postmodern Servant Economy.

[sigh]


The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Fri Apr 28th, 2006 at 03:36:37 AM EST
[ Parent ]
I have just found this link Povert across generations about the UK but have not looked at it yet.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Apr 28th, 2006 at 05:37:32 AM EST
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