The Crumbling Plutocracy

Whenever people ask me why I've chosen to live in Europe, I say that America's just become too damn depressing. What I'm talking about are things like this New York Times article, which helpfully informs us that the American higher-education system, which charges tuition fees that put students in a kind of debt bondage -- is demanding ever more tribute from its victims students:

Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.

The mountain of debt is likely to grow more quickly with the coming round of budget-slashing. Pell grants for low-income students are expected to be cut and tuition at public universities will probably increase as states with pinched budgets cut back on the money they give to colleges.

Some education policy experts say the mounting debt has broad implications for the current generation of students.

“If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for Student Access and Success. “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”

It's just another data point in the gradual destruction of the American middle class. You could also add the homeless shelter, already full, sending homeless families into the woods to live in tents , or the bankruptcy of one of America's greatest orchestras, or the political resentment caused by rising gas prices in an overwhelmingly car-dependent culture.

All these signs show America abandoning a principle that it used to share with Western Europe: In a decent society, someone of average talents with an average job should be able to afford the basic incidents of civilized life, such as a reasonably comfortable retirement, job security, regular vacations, childcare, entertainment, healthcare, and the ability to finance as much education as they or their children qualify for. This is the essence of social democracy -- it's not, as some people think, a giant charity for the poor, but a giant redistribution system for the middle class. In these societies, making a middle-class lifestyle affordable is partly done by naked redistribution, but is also accomplished indirectly by creating complex public-private hybrids like a heavily-regulated insurance industry and various tax subsidies. At least in Northern Europe, it still works reasonably well. That is, in Europe, much government activity is aimed at ensuring that ordinary people -- not the gifted, the beautiful, or the driven -- can go to a nice park on Sunday, take several vacations a year, get basic medical care, send their children to college, afford a newspaper subscription and opera tickets and the occasional nice restaurant meal, etc.

In the U.S., by contrast, the amount you need to earn to secure the ordinary incidents of middle-class life continues to rise, and far outstrips what most (formerly) middle-class people earn, as this report (pdf) documents. The middle class is like the proverbial frog in boiling water, passively observing as more and things their parents took for granted gradually slip out of reach. In short, the people who live where most Americans live -- not on the coasts, but in states like Texas or Arizona or Florida -- and the politicians who lead them -- have given up on the idea of trying to improve the way their communities work as societies. Of course, there are always exceptions. There are Arizonans and Texans who are doing old-fashioned social work (among them the Catholic Church, one reason the church has a reputation as -- mirabile dictu -- left wing in many parts of the USA). But changing a culture is a question of critical mass. There will never be a uniform belief that the welfare of all is the concern of all, but there has to be at least a broad consensus.

In places like Arizona, that's not even remotely the case. If you're an relatively privileged Arizonan, you don't try to solve social problems, or expect any government to do so. Suburban McMansions and massive vehicles waste incredible amounts of energy, yet merely suggesting that it might be wise to seek alternatives to a single person driving a three-ton automobile 500 yards to buy a gallon of milk will earn you a tirade about an American's God-given right to spend their hard-earned money however the hell they damn well please. Like this one.

The huge cars are all part of the contemporary American dream, which involves insulating yourself from social problems, rather than solving them. You live in the suburbs, possibly in a gated community, you buy a security system for your home (and maybe a gun), you send your kids to private school, you buy that tank-like car, you start saving for your children's college the moment they're born, you do whatever you can to keep your health insurance, you save for your own retirement, etc. If your children have problems, the last thing you will do is turn to the state. Its social services -- like its mass transit and its public-defender offices and its charity hospitals -- are under-funded and populated exclusively by people who can't afford anything better. You'll need to resolve family emergencies privately, and that means money for lawyers, tutors, shrinks, and private clinics, to make sure your childrens' futures aren't ruined by a criminal record.

All this private-market insulation against social problems and loss of status costs money, more every year. But if you're one of the few who can afford it, you can live a life in which everything works well for you: you live in a nice house in a safe neighborhood, you can pay all your bills, you'll get good medical care if you're sick, and your children will attend good schools and go to college. You'll soon forget about the people who don't have it as well as you do. Which, after all, is the point of insulation.

But you'll still be in the minority. As the Washington Post recently reported:

More than a year into the recovery, the economy is starting to show signs of improvement. The stock market has rebounded. Corporate profits are soaring. And yet, for millions of Americans, the lingering legacy of the Great Recession is a Great Slide, as job losses, declining home values and decimated retirement savings have knocked them down the socioeconomic ladder. For the formerly middle class, this slide plays out in big and small ways, from a loss of identity to the day-to-day inconveniences of life with less.

Unemployment is still over 8%, and income inequality has been increasing steadily. The latest crisis has just thrown into relief the background process in which working and middle classes have been falling behind for decades. It's brutally exposing just how much little insulation against misfortune remains for anyone below the upper-middle class.

Of course, the fact that the government doesn't meet the needs of ordinary people doesn't mean nobody does. Ever entrepreneurial, many firms make a living by exploiting others' economic hardship. The number one profiteers are, of course, large companies: unemployment increases the reserve army of labor, decreasing pressure on wages and reducing pressure to improve working conditions. Amazing as it sounds, there are still Americans naive enough to show unfeigned surprise that corporate profits are rising in times of high unemployment. But companies are just the beginning. The poorer areas of town are filled with payday loan shops, pawn shops, and other businesses whose business model is based on the old maxim: "It's expensive to be poor." Millions of people also get suckered in by private, for-profit "universities" located in gleaming office buildings by the side of the highway. There, they borrow tens of thousands of dollars a year to get degrees that often turn out to be useless -- or, at least, which don't furnish them with anything like the earning power they'll need to pay off their five-figure students loans. There's money to be made in convincing working-class people to spend beyond their means: the housing boom was caused in no small part by mortgage brokers who conned people of limited means into buying houses they couldn't afford, simply to pocket the fees.

When the other shoe drops -- when the house gets foreclosed on, or the sleep-deprived trucker working overtime jackknifes on the freeway, or the minimally-qualified nurse's assistant gives the wrong medication -- there are others waiting to profit. David J. Stern, a Florida lawyer who "made millions" processing evictions, "enjoyed a lifestyle that featured grand mansions, flashy sports cars and a yacht called Misunderstood. But the days of easy money are over for Mr. Stern, his law firm and ... investors."

Advertisements for plaintiffs' lawyers, in which they promise help to victims of truck or refinery accidents, plaster the freeways. Their websites proclaim them to be the tribunes of the little man -- the official motto of one plaintiff's firm is "Protecting What's Right®." But don't get the idea these protectors of the right are missionaries: they'll take 1/3 of whatever they win for the 'little guy". In return for this, of course, they'll always provide excellent and honest legal representation to their working-class (in American legal parlance, "unsophisticated") clients. Or maybe not -- as evidenced by the burgeoning sub-industry of lawyers who sue other lawyers for malpractice. Note, however, that the lawyer-malpractice lawyer won't take cases unless they involve at least $100,000 in damages.

And God forbid you should get in trouble with the law. America has a two-tier justice system: if you can't afford a private lawyer, you'll be dumped onto public defenders or "contract" attorneys. There, it's a pure lottery: the local public defender or private lawyer may care about their job -- or they may just be interested in processing as many cases as possible to enhance profit margins. Inmates in jails and prisons are fleeced right and left. One common scam, noted by a friend of mine who represents prisoners, is special meals for jail and prison inmates. The prison will outsources food preparation to a private firm. Part of the contract allows the firm to offer special higher-quality meals, which prisoners' relatives -- working-class or poor people -- can order online or by telephone. Of course, the same company providing the expensive-yet-delicious meals at a fat profit is also responsible for the "normal" meals. Which, predictably, are flavorless. Prisons also farm out telephone services to private companies, who charge astronomical fees to their captive customers.

The bottom line: if you're a working-class American, your social landscape is teeming not with efficient, low-cost social services, but with people and businesses picking over your ever-dwindling earnings like vultures huddled around a rotting corpse.

The most depressing part of all of this, perhaps, is that there's no end in sight. Americans have always been more individualistic than most other peoples, but this individualism used to be counterbalanced by an appreciation of solidarity, the role of unions, some sort of sense of collective responsibility for the most vulnerable. But that's all been gradually dismantled. Mainstream American discourse no longer understands the vocabulary it would need to even properly understand these problems. Firebrand, progressive Democratic politicians who actually took the 'little man's' side are long gone, as are the sort of Tory-conservative Rockefeller Republicans who acknowledged the need for strong social institutions -- if need be, the government -- to guarantee a decent standard of living to all. That sort of language doesn't even exist anymore in mainstream American political discourse. Kevin Drum recently summed it up well:

Income inequality has grown dramatically since the mid-'70s—far more in the US than in most advanced countries—and the gap is only partly related to college grads outperforming high-school grads. Rather, the bulk of our growing inequality has been a product of skyrocketing incomes among the richest 1 percent and—even more dramatically—among the top 0.1 percent. It has, in other words, been CEOs and Wall Street traders at the very tippy-top who are hoovering up vast sums of money from everyone, even those who by ordinary standards are pretty well off.

Second, American politicians don't care much about voters with moderate incomes. Princeton political scientist Larry Bartels studied the voting behavior of US senators in the early '90s and discovered that they respond far more to the desires of high-income groups than to anyone else. By itself, that's not a surprise. He also found that Republicans don't respond at all to the desires of voters with modest incomes. Maybe that's not a surprise, either. But this should be: Bartels found that Democratic senators don't respond to the desires of these voters, either. At all.

So it's hardly a surprise that Obama recently announced his ideal campaign contribution for the upcoming 2012 election: $350,000. I'll vote for him anyway, I suppose, if I bother to vote at all. But until something dramatic changes -- and in America, it always can -- I can't get all that excited about who will eventually run the crumbling plutocracy...

Comments

[Ralph]

Sorry to hark back on this, Andrew, but while trying to enjoy today's pleasant weather in a rural setting (not far from Düsseldorf, btw), I found myself annoyed by continual background noise of high-end BMWs, SUVs, motorcycles and so on, and remembered your observation:

"The huge cars are all part of the contemporary American dream" (and so on)

The automobile fetish has to be nearly as bad, perhaps even worse, here in Germany. In this connection, looking up the above "Transpond" blog link, I found some good arguments not to one-sidedly castigate American motor vehicle culture.

[rudy]

Oo a lot of romanticism concerning Germany.
Some facts instead:
- Germans retirement age is 67 (not 60 like in France, 65 in the US)
- German loans are highly subsidized to make Germans products more competitive
- Germany's debt is about 80 percent GDP; more debt than Spain
Actually Germans automotive unions at famous Opel (GM brand) demanded GM to produce less Chevrolets in Corea and Mexico and bring production to Germany.
Simply because they want to keep their highly unproductive plants with overpaid workers on the cost of others.
That's the kind of German solidarity and collectivism.

[clickclackgorilla]

This is exactly the sort of shit that makes me balk at the thought of ever moving back to the States.

[Alex]

Its a bitter and depressing text, but it seems to be a good analysis.
I think it would be worth sending it to some press or magazine as a print article - just as a start of greater public discssion about ways the western world would like to go on.
This discussion is nessecary (and partly undergoing) in Europe as well as in America.
So if you would want to translate it to German I'm shure you would find german debating magazines as well to print it.
I would really appreciate that.

[Ney]

Not long ago we thought nothing ever would change in a seemingly rigid country like Egypt...

[Anselmus]

But... I thought it was all about winning the future?!

"Mainstream American discourse no longer understands the vocabulary it would need to even properly understand these problems."

Absolutely spot on. And it is getting harder to find that vocabulary in German politics as well.

[Babeaty]

It's a;ways good to get a clear-eyed view of your own situation from the outside, and this one is very clear-eyed indeed. It calls out some things that even those of us who consider ourselves progressive have come to accept and take as "natural' and "normal." Frogs in a pot of boiling water indeed!

Let me, however, share a glimmer of hope. The protests of the past few months in Madison, Wisconsin have proved to me (and I think others around the country) that people still expect some sort of social contract to be honored by their leaders. The Tea Party officials who took office are finding middle class workers and farmers are not so happy with budget slashing, union busting, and the elimination of social services. People are learning they need to speak up and take action.

[Jul]

Personally, one of my favorite reasons for living in Europe these days is getting to ignore the fact that the Tea Party exists. Depressing stuff going on in the US, indeed.

Nice post.

[johannes]

In these societies, making a middle-class lifestyle affordable is partly done by naked redistribution, but is also accomplished indirectly by creating complex public-private hybrids like a heavily-regulated insurance industry and various tax subsidies.

As a middle class German, who has seen practically all the lawyer, physician and dentist friends and relatives of his family loose huge amounts of money in closed real estate funds, shipping funds, aircraft funds and other tax write-offs, I would say that this system does not redistribute wealth from the upper to the lower middle class, but rather from the upper middle class to the banks, multi level marketing companies or plain gangsters.

to a single person driving a three-ton automobile

The product of massive government subsidies; see here:

http://www.amazon.com/High-Mighty-Suvs-Dangerous-Vehicles/dp/1586481231

[miz]

Very depressing, indeed, and the "College Inc." documentary is particularly so. All the problems you describe crystallise there: education, Congress/lobbying, fraud of "unsophisticated" people, subprime loans, and (intentionally) misguided aspirations.

[Hepkat]

Good thing you were able to find a good home in Europe! I guess the grass is always less green on the other side.

[André S.]

Very depressing outlook. I don't see any chance in the near future that this could change. The pressure of need is obviously not high enough (currently) that people will go on the streets to fight for a better society.
And I fear that the progress in (middle) Europe will go in a similar direction.