Gross economic inequalities in the US

An earlier post (link) highlighted the growing severity of inequalities of wealth and income in the United States, as well as Elizabeth Warren's very sensible "billionaire" tax proposal. According to a 2020 article in Forbes, "According to the latest Fed data, the top 1% of Americans have a combined net worth of $34.2 trillion (or 30.4% of all household wealth in the U.S.), while the bottom 50% of the population holds just $2.1 trillion combined (or 1.9% of all wealth)" (Forbes, link). That bears repeating: 1% of Americans own 30.45% of wealth in the United States, while the bottom 50% owns under 2% of wealth. Those disparities in wealth have worsened during the past two years of pandemic. The Forbes story notes that Elon Musk's wealth increased from $100 million to $240 million in the first eight months of 2020, and Jeff Bezos' wealth increased by $65 billion in 2020.

A recent story in the New Yorker on mega-yachts underlines the obscene imbalance that exists between the super rich and the rest of us. Evan Osnos' "The Floating World" offers a glimpse into the mega-luxury and consumption associated with super-yachts (link). Much of the world's attention to super-yachts has gravitated to the Russian oligarchs and the economic sanctions that have resulted in seizure of a number of multiple-hundred-million dollar ships around the world. But of course, it is not only Russian oligarchs who have captured their nations' wealth. Oligarchs and billionaires from the United States, Europe, the Middle East, and Central America are part of the same bleak picture.

The level of consumption on luxury involved in the world of super-yachts in the article is obscene in the original sense of the word; it is a conspicuous display of wealth that makes one sick. The idea that a single individual or family would have the financial ability to purchase a 500-million dollar ship (limited by maritime law to carrying only 12 guests and unlimited crew) is grotesque. (Osnos quotes a luxury yacht industry estimate that the annual cost of maintaining a mega-yacht is 10% of its purchase cost. So a half-billion dollar ship requires $50 million in annual maintenance.) And this grotesquerie is especially stark in a world where global and national poverty are persistent obstacles to free human development for the world's population and climate change imperils everyone. (Osnos notes that experts estimate that "one well-stocked diesel yacht is estimated to produce as much greenhouse gas as fifteen hundred passenger cars".)

It is impossible to describe the situation of wealth inequality in the United States as anything other than a "laissez-faire robber baron regime" of wealth creation and consumption. We functionally have no effective tax policy that constrains the accumulation of hundreds of billions of dollars by a small number of individuals and families.

Here is a very interesting video panel organized by the Brookings Institution on the current status of wealth-tax proposals (link). Especially interesting in the discussion is the emphasis on wider positive effects of a wealth tax, including a shift in political power and an enhancement of racial and gender equity.

So what about the rest of us -- the population falling below the 90th-percentile of income? Here is a graph of recent income-distribution data by select percentiles (link):

Several things are apparent from this graph of income distribution. (It is important to recall that the distribution of wealth is much more extreme than the distribution of income.) First, the median household income (50th percentile of households) is $67,463. This is just under 2.5 times the Federal poverty level for a household of four individuals. This income is pre-tax; so the monthly budget of the median household is roughly $4,000 per month. This is a very tight budget that must cover all expenses: housing, food, transportation, clothing, healthcare, and so on. It is clear that households at the 50th percentile are financially struggling, and are unlikely to be able to afford a mortgage on a house. These Americans are also likely to be unable to save significantly, including savings for future educational costs for their children. Second, the 99th-percentile household income is about 7.5 times the median household income. A family with over $500,000 household income has no month-to-month financial constraints; it is not difficult to save significant resources over time; and owning property for this household is entirely feasible. 

What would a more equitable world look like? Robert Lynch attempts to construct a rough estimate of the economic benefits of achieving economic equity across racial, ethnic, and gender lines in "The economic benefits of equal opportunity in the United States by ending racial, ethnic, and gender disparities" (Equitable Growth, link). Here are the reforms that Lynch believes are crucial for substantive progress on equality of opportunity without regard to race, ethnicity, or gender:

To achieve an equal-opportunity society where there are no barriers to economic success that are the consequence of race, ethnicity, or gender disparities would obviously require tackling overt racism and sexism.

But true equal opportunity requires more than that. It involves addressing many other disparities that undermine worker productivity, such as unequal access to jobs, education, credit in the form of home mortgages and business loans, affordable child care, high-quality pre-Kindergarten, and senior care; inconsistencies in family leave and workplace policies and in treatment in the justice system; imbalances in access to healthcare and insurance; unequal exposure to damaging levels of environmental pollutants; and inadequate and unequal access to high-quality physical infrastructure, which is essential to maximizing economic efficiency.

Here is his conclusion:

The U.S. economic consequences of eliminating racial, ethnic, and gender inequalities are large, particularly for individuals of color and women. The total earnings in the nation would swell well beyond what they currently are, and the incomes of Black, Hispanic, and Asian workers would be substantially higher. The largest earnings gains would be experienced by non-Hispanic White, Black, Hispanic, and Asian women.

Whose wealth is it anyway? The libertarian laissez-faire ideology is that the "creators" of wealth are solely responsible for this wealth, and it morally and legally belongs to them. But a much more credible view is that a national economy is a vast and extended system of economic cooperation, with a substantial "social product" that should not be captured by a small number of strategically located actors. The term "rent-seeking" appears to apply perfectly here. There is also the familiar but spurious argument that vast inequalities are needed in order to generate incentives for productivity and innovation. This argument is spurious: first, much innovation comes forward from ordinary participants in economic activity who rarely see financial benefits from their innovations; and second, it is laughable to imagine that only the prospect of a $200-billion windfall would motivate an "entrepreneur" to his or her wild and crazy new ideas. Would the prospect of a billion-dollar windfall not work as an incentive? Would $100 million not work? Ha! The idea of the moral or economic inevitability of unlimited wealth accumulation is simply self-serving ideology.

In large strokes the Warren wealth tax proposal represents a moderate tax on the super-rich; and it could have a very large impact on a range of issues of political stability, economic equity, and equality of opportunity that are crucial for the future of our democracy.

Carlyle's critique of modernity

What is wrong with life in the modern world? The complaint that modern society represents a toxic reduction of the importance of community in the lives of individuals is a familiar one. One version of this critique is the idea is that modern society has replaced all personal bonds and relationships with a single "cash nexus". And the observation that modern market economies function to create cruel and increasing misery and inequality is entirely well founded. It may surprise some readers to learn that this complaint is nearly two centuries old. At the time that Karl Marx was denouncing capitalism for its immiseration of the industrial working class, Thomas Carlyle was bitterly castigating British government for its policies of laissez-faire and its refusal to address the problems of destitution seriously. And Carlyle introduced the idea of the cash nexus in his essay on Chartism in 1840:

O reader, to what shifts is poor Society reduced, struggling to give still some account of herself, in epochs when Cash Payment has become the sole nexus of man to men! On the whole, we will advise Society not to talk at all about what she exists for; but rather with her whole industry to exist, to try how she can keep existing! (Chartism, 61)

Consider the opening paragraphs of Past and Present, which draw attention to the two Englands that existed in the 1830s:

THE condition of England, on which many pamphlets are now in the course of publication, and many thoughts unpublished are going on in every reflective head, is justly regarded as one of the most ominous, and withal one of the strangest, ever seen in this world. England is full of wealth, of multifarious produce, supply for human want in every kind, yet England is dying of inanition. With unabated bounty the land of England blooms and grows; waving with yellow harvests; thick-studded with work- shops, industrial implements, with fifteen millions of workers, understood to be the strongest, the cunningest and the willingest our Earth ever had; these men are here; the work they have done, the fruit they have realised is here, abundant, exuberant on every hand of us: and behold, some baleful fiat as of Enchantment has gone forth, saying, “Touch it not, ye workers, ye master-workers, ye master-idlers, none of you can touch it, no man of you shall be the better for it; this is enchanted fruit!” On the poor workers such fiat falls first, in its rudest shape; but on the rich master-workers too it falls; neither can the rich master-idlers, nor any richest or highest man escape, but all are like to be brought low with it, and made ‘poor’ enough, in the money-sense or a far fataller one.

Of these successful skilful workers some two millions, it is now counted, sit in Workhouses, Poor-law Prisons; or have ‘out- door relief’ flung over the wall to them,—the workhouse Bastille being filled to bursting, and the strong Poor-law broken asunder by a stronger.* They sit there, these many months now; their hope of deliverance as yet small. (Past and Present, 1)

Carlyle was aware of two highly visible "diseases" of English society in the first half of the nineteenth century: the poverty and degradation of working people, and the unfairness of the prevailing social and economic relations between privileged and poor. In passage after passage in Past and Present he denounces the extreme misery of working people:

Descend where you will into the lower class, in Town or Country, by what avenue you will, by Factory Inquiries, Agricultural Inquiries, by Revenue Returns, by Mining-Laborer Committees, by opening your own eyes and looking, the same sorrowful result discloses itself: you have to admit that the working body of this rich English Nation has sunk or is fast sinking into a state, to which, all sides of it considered, there was literally never any parallel. (Past and Present, 3)

And these inequalities of economic wellbeing are grossly unfair:

We have more riches than any Nation ever had before; we have less good of them than any Nation ever had before. Our successful industry is hitherto unsuccessful; a strange success, if we stop here! In the midst of plethoric plenty, the people perish; with gold walls, and full barns, no man feels himself safe or satisfied. Workers, Master Workers, Unworkers, all men come to a pause; stand fixed, and cannot farther. (Past and Present, 5)

It is 'for justice' that he struggles; for just wages, — not in money alone! An ever-toiling inferior, he would fain (though as yet he knows it not) find for himself a superior that should lovingly and wisely govern: is not that too the 'just wages' of his service done? (Chartism, 22)

This is Carlyle, an intelligent observer of modern economic society in the 1840s. Carlyle's prescriptions for a better future for England were reactionary: rule by well-intentioned kings, a well-established social hierarchy in which each person knew his or her place, and revitalized religious institutions. His political vision of the future was romantic and backward looking. But his analysis of the current pathologies of England's social and economic life was profound. And so thought Frederick Engels, who wrote an extensive review of Past and Present almost immediately upon its publication:

This is the condition of England, according to Carlyle. An idle landowning aristocracy which “have not yet learned even to sit still and do no mischief", a working aristocracy submerged in Mammonism, who, when they ought to be collectively the leaders of labour, “captains of industry", are just a gang of industrial buccaneers and pirates. A Parliament elected by bribery, a philosophy of simply looking on, of doing nothing, of laissez-faire, a worn-out, crumbling religion, a total disappearance of all general human interests, a universal despair of truth and humanity, and in consequence a universal isolation of men in their own “brute individuality", a chaotic, savage confusion of all aspects of life, a war of all against all, a general death of the spirit, a dearth of “soul", that is, of truly human consciousness: a disproportionately strong working class, in intolerable oppression and wretchedness, in furious discontent and rebellion against the old social order, and hence a threatening, irresistibly advancing democracy – everywhere chaos, disorder, anarchy, dissolution of the old ties of society, everywhere intellectual insipidity, frivolity, and debility. – That is the condition of England. Thus far, if we discount a few expressions that have derived from Carlyle’s particular standpoint, we must allow the truth of all he says. He, alone of the “respectable” class, has kept his eyes open at least towards the facts, he has at least correctly apprehended the immediate present, and that is indeed a very great deal for an “educated” Englishman. (Engels, Review of Past and Present)

Now consider the concerns and criticisms offered of our own era by an equally astute observer, Tony Judt. His 2010 book of reflections, Ill Fares the Land, offers a remarkably similar set of criticisms that are both systemic and moral. Consider first the title. This phrase calls us back to Oliver Goldsmith, who used the line in his 1770 poem "The Deserted Village":

Sunk are thy bowers, in shapeless ruin all,
And the long grass o'ertops the mouldering wall;
And, trembling, shrinking from the spoiler's hand,
Far, far away, thy children leave the land.
Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay:
Princes and lords may flourish, or may fade;
A breath can make them, as a breath has made;
But a bold peasantry, their country's pride,
When once destroyed, can never be supplied.

"Ill fares the land, to hastening ills a prey, Where wealth accumulates, and men decay ..." -- Goldsmith, Carlyle, and Judt all denounce the same characteristic of a modern wealth-based economy. The single-minded quest for wealth and material advantage leads to social disaster.

Here is how Judt begins his critique, writing in 2010:

Something is profoundly wrong with the way we live today. For thirty years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth. We no longer ask of a judicial ruling or a legislative act: is it good? Is it fair? Is it just? Is it right? Will it help bring about a better society or a better world? Those used to be the political questions, even if they invited no easy answers. We must learn once again to pose them.

The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears ‘natural’ today dates from the 1980s: the obsession with wealth creation, the cult of privatization and the private sector, the growing disparities of rich and poor. And above all, the rhetoric which accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth. (Introduction)

Judt highlights three aspects of our current economic realities: the ludicrous levels of concentration of wealth that we have reached in the second decade of the twenty-first century, and the conspicuous consumption that accompanies it; the widening inequalities that western economies have witnessed since the 1970s, leading to every-more severe disparities of outcomes between affluent and poor (health, education, employment, mobility); and the absolute immiseration of the poor in many advanced capitalist economies, including the US. These facts lead to appalling outcomes: misery, to be sure; but also, erosion and extinction of social trust, commitment to the public good, and a sense of community that is broader than "involvement in a market economy". A society based entirely on the "cash nexus" is a bankrupt society -- this was Carlyle's view, and it is Judt's view as well. And, paradoxically enough, the erosion of trust and community is ultimately toxic for the stability and health of the market-based capitalist society itself.

The collapse of the value of community is marked by the conservative movement towards small government, privatization, elimination of public support, and minimal (negligible) regulation of industry and economy. This collapse signals an important moral fact: the idea that the citizens of a minimal state have no obligations to their fellow citizens through public programs. The affluent are "self-made" and the poor are incompetent and unmotivated -- undeserving of compassion and public support. But for Judt this is insane: it reflects a solipsism worthy of Ayn Rand, imagining self-sufficiency of the individual with no dependency on social arrangements. This view of modern society is truly deranged; without public roads, honest co-workers, and peaceful citizens, we are back in the world that Hobbes imagined. Or, as Judt quotes JS Mill: “No great improvements in the lot of mankind are possible, until a great change takes place in the fundamental constitution of their modes of thought ” (151).

What is genuinely noteworthy is how similar the outlines and concerns are of Judt's critique in 2010 to Carlyle's critique in 1841. Judt's solution for the coming generation is simple: to bring new energy into the moral and social ideal of "social democracy" -- a liberal society based on freedom and wellbeing for all its citizens, a system of mutual cooperation and respect. And the mechanics of a just society are reasonably well understood, both in practice and in theory. Most generally, they are the institutions of what John Rawls calls a "property-owning democracy":

Both a property-owning democracy and a liberal socialist regime set up a constitutional framework for democratic politics, guarantee the basic liberties with the fair value of the political liberties and fair equality of opportunity, and regulate economic and social inequalities by a principle of mutuality, if not by the difference principle. (Justice as Fairness 138)

Or in other words, a just polity based on the equal dignity and worth of all citizens will involve protections of fundamental liberties; secure and equal democratic institutions; and extensive provision of public benefits such as education, healthcare, adequate nutrition, and a dignified life (link). And these are precisely the premises of social democracy in Europe for over a century.

Alternative social systems and individual wellbeing

Communism ...

or Capitalism?

A joke from Poland in the 1970s: "In capitalism it is a question of man's exploitation by man. In communism it is the reverse."

A modern social system is an environment where millions of people find opportunities, develop their talents, express their beliefs, and earn their livings within the context of a set of economic and political institutions. Specific institutions of property, power, ideology, education, and healthcare create an environment within which citizens of all circumstances pursue their life interests. Individuals exercise their freedoms through the institutions within which they live, and those institutions also determine the quality and depth of social resources available to the individual that determine the degree to which he or she is able to develop talents and skills and gain access to opportunities. Institutions create constraints on freedom of choice that range from the nearly invisible to the intensely coercive. Institutions create inequalities of opportunity and outcome for different groups of citizens; rural people may have more limited access to higher education, immigrant and minority communities may experience discrimination in health and employment; and so on. Further, social systems differ in the balance they achieve between "soft" constraints (market, education, regional differences) and "hard" constraints (police, regulations governing behavior, extra-legal uses of violence).

To describe a set of institutions and a population of individual actors as a system has a number of implications, some of which are unjustified. The idea of "system" suggests a kind of functional interconnection across its components, with needs in one subsystem eliciting adjustments in the activities of other subsystems to satisfy those needs. This mental model is misleading, however. Better is the ontology of "assemblage" discussed frequently here (link, link, link). This is the idea that a complex social thing is the unintended and largely undesigned accumulation of multiple independent components. One set of processes leads to the development of the logistics infrastructure of a society; another set of processes leads to the development of the institutions of government; and yet other path-dependent and contingent processes contribute to the system of labor education, management, and discipline that exists in a society. These various institutional ensembles are overlaid with each other; sometimes there are painful inconsistencies among them that are resolved by entrepreneurs or officials; and the result is a heterogeneous and largely unplanned agglomeration of social arrangements and practices that add up to "the social system". 

A central premise of some classics of social theory, including Marx, is that the institutions through which social interactions take place form large and relatively stable configurations that fall into fairly distinct groups -- feudalism, capitalism, communism, socialism, social democracy, authoritarianism. And different configurations of institutions do better or worse in terms of the degree to which they allow their members to satisfy their needs and live satisfying lives. The ontology associated with the theory of assemblage, however, is anti-essentialist in a very important sense: it denies that there are "essentially similar configurations" of institutions that play crucial roles in history, or that there is a tendency towards convergence around "typical" ensembles of institutions. In particular, it suggests that we reject the idea that there are only a few historically possible configurations of institutions -- capitalism, socialism, authoritarianism, democracy -- and rather analyze each social order as a fairly unique configuration -- assemblage -- of specific institutional arrangements.

This perspective casts doubt on the value of singling out "capitalism," "liberal democracy," "religious autocracy," "apartheid society," "military dictatorship," or "one-party dictatorship" as schemes for understanding distinctive and sociologically important patterns of un-freedom. Rather than considering these different "ideal types" of social-political systems as structures with distinctive dynamics, perhaps it would be more satisfactory to consider the problem from the point of view of the citizens of various societies and the degree to which existing social, political, and economic institutions serve their development as full and free human beings.

Amartya Sen's framework for understanding human wellbeing in Development as Freedom is valuable in this context (link). Sen understands wellbeing in terms of the individual's ability to realize his or her capabilities fully and to live within an environment enabling as much freedom of action as freely as possible. Sen's framework gives a powerful basis for paying close attention to inequalities within society; a society in which one-third of the population have exceptional freedom and opportunities for development, one-third have indifferent attainments in these crucial dimensions, and one-third have extremely limited freedoms and opportunities is plainly a less just and desirable society than one in which everyone has the same freedoms and a relatively high level of opportunities for development -- even if the average attainment for the population is the same in the two scenarios.

This prism permits us to attempt to understand the structural characteristics of society -- political, cultural, religious, economic, or civic -- in terms of the effects that those institutional arrangements have on the freedoms and capacity for development of the population. This is the underlying rationale for the Human Development Index, but the HDI is primarily focused on development rather than freedom.

We might try to evaluate the workings of a given ensemble of social and political institutions by devising an index of human wellbeing and freedom that can be applied to each society. Examples of indexes along these lines include the Human Development Index, the Opportunity Index, and the Cato Institute Freedom Index. Every index is selective. It is interesting and important to observe, for example, that political freedom plays no role in the Human Development Index, while the Cato Institute index pays no attention to the prerequisites of freedom: access to education, access to health care, freedom from racial or ethnic discrimination.

So each of these indices is limited as a scheme for evaluating the overall success a particular institutional configuration has in creating a free and enabling environment for its citizens. But suppose we had a composite index that reflected both freedom (broadly construed) and wellbeing? Such an index might look something like this:

• Rule of law 
• Security and safety 
• Movement 
• Religion 
• Association, assembly, and civil society 
• Expression and information
• Identity and relationships 
• access to quality education
• access to quality healthcare
• freedom from racial, ethnic, and gender discrimination in employment, education, housing, and other social goods
• equality of opportunity

(It is interesting to observe that these characteristics align fairly well with the contents of the Universal Declaration of Human Rights.)

Using an index like this, we could then ask important comparative questions: How do ordinary citizens fare under the institutions of contemporary Finland, Spain, China, Russia, Nigeria, Brazil, Romania, France, and the United States? An assessment along these lines would put us in a position to give a normative evaluation of the various social systems mentioned above: what social, political, and economic arrangements do the best job of securing each of these freedoms and opportunities for all citizens? Under what kinds of institutions -- economic, political, social, and cultural -- are citizens most free and most enabled to fully develop their capacities as human beings?

It seems evident that the answer to this question is not very esoteric or difficult. Freedom requires the rule of law, respect for equal rights, and democratic institutions. Real freedom requires access to the social resources that permit an individual to fully develop his or her talents. A decent life requires a secure and adequate material standard of living. These obvious truths point towards a social system that embodies the protections of a constitutional liberal democracy; extensive public support for the social resources necessary for full human development (education, healthcare, nutrition, housing); and an extensive social welfare net that ensures that all members of society can thrive. There is a name for this set of institutions; it is called social democracy. (Here are several earlier posts that reach a similar conclusion from different starting points; link, link.)

And where are the social democracies in the world today? They are largely the Nordic countries: Finland, Denmark, Norway, Sweden, and Iceland. Significantly, these five countries consistently rank in the top ten countries in the World Happiness Report (link), a rigorous and well-funded attempt to measure citizen satisfaction with the same care as we measure GDP or national health statistics. The editors of the 2020 report describe the particular success of Nordic societies in supporting citizen satisfaction in these terms:

From 2013 until today, every time the World Happiness Report (WHR) has published its annual ranking of countries, the five Nordic countries – Finland, Denmark, Norway, Sweden, and Iceland – have all been in the top ten, with Nordic countries occupying the top three spots in 2017, 2018, and 2019. Clearly, when it comes to the level of average life evaluations, the Nordic states are doing something right, but Nordic exceptionalism isn’t confined to citizen’s happiness. No matter whether we look at the state of democracy and political rights, lack of corruption, trust between citizens, felt safety, social cohesion, gender equality, equal distribution of incomes, Human Development Index, or many other global comparisons, one tends to find the Nordic countries in the global top spots.

And here is their considered judgment about the circumstances that have led to this high level of satisfaction in the Nordic countries:

We find that the most prominent explanations include factors related to the quality of institutions, such as reliable and extensive welfare benefits, low corruption, and well-functioning democracy and state institutions. Furthermore, Nordic citizens experience a high sense of autonomy and freedom, as well as high levels of social trust towards each other, which play an important role in determining life satisfaction. (131)

The key factors mentioned here are worth calling out for the light they shed on the current dysfunctions of politics in the United States: effective institutions, extensive welfare benefits, low corruption, well-functioning democracy, a limited range of economic inequalities, a strong sense of autonomy and freedom, and high levels of social trust and social cohesion. It is evident that American society is being tested in each of these areas by the current administration, and none more so than the areas of trust and social cohesion. The current administration actively strives to undermine both trust and social cohesion, and goes out of its way to undermine confidence in government. These are very disturbing signs about what the future may bring. Severe inequalities of income, wealth, and social resources (including especially healthcare) have become painfully evident through the effects of the Covid-19 epidemic. And the weakness of the social safety net in the United States has left millions of adults and children in dire circumstances of unemployment and hunger. The United States today is not a happy place for many of its citizens.

Development ethnography and the life of the poor

Indian economists V. K. Ramachandran and Madhura Swaminathan have edited a highly interesting volume, Telling the Truth, Taking Sides: Essays for N. Ram, that will be of interest to anyone concerned with the progress of India in recent years. The book is a set of essays dedicated to the impact and progressive legacy of N Ram, journalist, writer, and important voice of the Left in India, and all the essays are very good.

Ramachandran's own contribution is a piece of what we might call "development ethnography", a pair of interviews (link) with the Tamil Nadu landless worker Gabriel Selvam. This case study is a valuable document for anyone interested in poverty and global justice. Ramachandran conducted interviews with Selvam at both ends of Selvam's working life, in 1977 and 2017, and the experiences that Selvam describes are emblematic of the extreme poor in India and elsewhere throughout that forty-year period. Selvam has lived most of his life in rural Tamil Nadu, near the town of Gokilapuram. And Selvam's life history illustrates many of the deep themes of enduring poverty and inequality in rural India -- debt, bonded labor, inadequate access to land, caste, and extremely limited opportunities for collective action.

Usury involving a sum of only 100 rupees forced Selvam into a form of debt bondage to a landlord: "Selvam attached himself as a farm servant for a remuneration of Rs 65 per month, plus one sheet, a dhoti, a shirt and a thunda (towel-cloth) a year." He worked 13 hours a day for the salary of Rs 65 per month. After four years the salary increased to Rs 100 per month. (At the 2000 exchange rate of Rs 45 / dollar this is about $2.22 / month.)

Debt bondage has been formally illegal in India since 1976. But Selvam's condition is clearly one of debt bondage: "There is no choice, I can't leave my mudalali [employer, landlord] unless I can clear my debt of Rs 300. I would certainly like to leave."

Largescale eviction from farm land is also a part of Selvam's story. Green Revolution seeds and techniques made farm land more profitable, and landlords had an interest in evicting poor farmers from the land they had previously rented at low rents. Poor farmers became landless workers.

The persistent and debilitating disadvantages of caste in rural India are evident in this story as well. Selvam is of a scheduled caste, and it seems apparent that the wage differentials that he experienced throughout his working life had much to do with his dalit status.

Destitution-level housing is also a striking part of the story that Selvam tells. In 1977: "As for his home, Selvam cannot afford to erect a complete hut. When he gets a small amount of money, he adds a row of bricks to the hut. Some months ago, he bought a door-frame. Now, there is a door-frame, fixed with mud into a few rows of country-made brick, with no wall around it or roof above. The single room in the hut is 8 feet by 6 feet." In 2017, the time of the second interview, the hut has been completed: "it is completed and expanded now: a neat, whitewashed structure that has the meagre furniture and appurtenances of a house that is still, after all, the house of a full-time rural manual worker."

In 2017 Selvam's wage has also improved; he now earns Rs 4000 per month for hard agricultural labor -- in today's exchange rate, about $40 / month. As Selvam says, they are better off. And yet it is clear -- "better off" in Selvam's village still means poor access to education and healthcare, limited nutrition, an extremely low income, and a life of toil that few Americans can even imagine.

I hope that you will read the whole interview. It is a more powerful testament to the depth of poverty and inequality in rural India than any set of economic statistics could ever convey.

Here is a World Bank report that makes for excellent parallel reading alongside Ramachandran's case history (Raji Jayaraman and Peter Lanjouw, "The Evolution of Poverty and Inequality in Indian Villages"; link).

Guest post: VK Ramachandran on details of life as a day laborer in India

[V. K. Ramachandran was a Professor of Economics at the Indian Statistical Institute, and is at present vice chairman of the State Planning Board of the state of Kerala. He is the author of Wage Labour and Unfreedom in Agriculture: An Indian Case Study. Previous discussions of Ramachandran's work in Understanding Society can be found here (link, link, link, link), and here is an interview I conducted with VK in 2008; link.]

[Acknowledgement: Extracted from Ramachandran, V. K., and Madhura Swaminathan, (eds.) (2018), Telling the Truth, Taking Sides: Essays for N. Ram, Tulika Books, New Delhi. This is a set of essays dedicated to the impact and progressive legacy of N Ram, journalist, writer, and important voice of the Left in India.]

"Gabriel Selvam: A Biography of Work"

V. K. Ramachandran

Among the many the many things in which N. Ram was an early instructor (and I not good enough a learner) was on how to interview, take notes, edit copy, and present the results from conversation and observation.

NR was the first among us to meet Gabriel Selvam, and the description “upstanding young agricultural labourer” is his.

An Interview in Two Parts, 1977 and 2017

1977: Young Bonded Worker

G. Selvam (35) is an upstanding young agricultural labourer who has bonded himself as a pannaiyal (permanent farm servant) out of economic necessity. Selvam’s family is of the Parayar scheduled caste.

A loan of Rs 100 taken over six years ago from CT, a petty usurer, led directly to his present condition as farm servant. At that time, the loan was taken for subsistence needs and was perceived as a temporary expedient. On account of a 120 percent interest rate, the loan of Rs 100 became a liability of Rs 220 over a year. The usurer pressed Selvam, then 31 years old, to sell his house in order to repay the loan. Selvam, refusing to abandon the family house site, went around asking for a way to work off his debt. The opportunity presented itself in the form of the landlord SCC. This landlord, who was looking for a young and strong farm servant, was willing to advance the money to clear the debt, provided Selvam attached himself as a farm servant for a remuneration of Rs 65 per month plus one sheet and a dhoti, a shirt, and a towel-cloth (thundu) a year.

Selvam took an advance of Rs 100 for going to work as a farm servant, and used that to clear just under half his debt. Then, after the first month of work, he took a loan of Rs 120 to clear the debt.

Since then, that is, for six years, Selvam has been working for well over 13 hours a day. He worked at the salary of Rs 65 a month for four years. Two years ago, when paddy prices soared to nearly Rs 150 per 58-kilogram bag, the farm servants in the village asked their employers for a raise. Selvam was given a wage rise that was long overdue: in 1977 he was paid Rs 110 a month.

SCC, like some other big landlords in the village, has found it much to his advantage to hire a farm servant in this way. He has advanced small sums of money to Selvam over the years, sums always taken “temporarily,” but with no real chance of the debtor repaying the debt and getting out of his present condition. Selvam makes it clear that he is not paid anything near the remuneration he should be getting for this work. “There is no choice,” he says, “I can’t leave my mudalali (employer, landlord) unless I can clear my debt of Rs 300. I would certainly like to leave.”

In his childhood, Selvam was not as badly off as he is today. His father, Gabriel, was a poor or lower-middle peasant, cultivating surface-irrigated land that had been leased in from landlords of the village. His mother worked as a hired labourer.

His father sent Selvam to school. Selvam studied in the Mission School in Gokilapuram, down the road from where he lives today, up to the fifth class. He completed the sixth class at the NMR School in Gokilapuram. Selvam was a good student and his father sent him to Vatthalakundu, where Selvam studied in the seventh and eighth classes, finishing when he was 16 years old. He stayed at a hostel at Vatthalakundu, and his father sent him Rs 20 a month. Selvam returned to the village after finishing the eighth class. He can read and write Tamil and can still read some English.

Selvam’s father tilled 6 kuzhi (3.6 acres) of surface-irrigated land belonging to landlord ST on kuthagai (fixed rent) for 20 years. He also worked 1.5 acres of groundwater-irrigated land belonging to SP, a landlord of Uthamapalayam. Selvam also worked on the land leased in by the family. Selvam married when he was 20 years old. His wife, Alphonse, is from a family of tenant cultivators from Pudupatti in Uthamapalayam taluk.

In about 1967, there was a sharp decline in the agriculture conducted by the family. The surface-irrigated land had poor soil and bad drainage, and standing water after the rain affected the crop. The land was manured only for one crop, one of the reasons for the yield being poor. The groundwater-irrigated land had a well with plenty of water and had a pulley and rope to draw water with. But household cultivation was in decline, the family began to incur debt, and the age-old symbol of a peasant family heading towards destitution became apparent: the cattle owned by the family became thin and weak.

About the same time, eviction took place on a large scale in the village. Earlier, the paddy crops were the traditional parunnel and samba varieties; later, with the introduction of new seeds, yields were higher, and agriculture became more profitable for the landlords. There was also fear among them, Selvam said, that the tenants would assert their right to cultivate the land. Landlords brought pressure on the tenants to leave the land. Rents were raised, rack-rents were imposed on tenants. In some cases, landlords brought great pressure on tenants to leave, offering them small amounts of money to do so. The peasants were disunited, Selvam said, and, out of fear, accepted the money and left the land.

Agricultural Wage Work

Selvam made it clear that the big landlords can always bring pressure on agricultural labourers; as for agricultural labourers, there is little scope for their advance today. Opportunities for employment in some tasks have gone down since the arrival of tractors, Selvam pointed out. The tractor has robbed those with ploughs and bullocks of ploughing work, and those with carts and bullocks of work in basal manuring. Even during threshing, the tractor has deprived agricultural labourers of employment. While earlier, there would be four days’ work at the threshing-floor and four bullocks would be needed to trample the grain for the second threshing, now the tractor can be driven over the sheaves to complete the task in less than an hour.

Unemployment is high and wages are poor, and women’s wages have actually been brought down, from Rs 3 per day to Rs 2.50 per day. There was agitation by Communists five years ago in southern villages of the Valley, Selvam recalls, when men workers won an increase in their grain wages, from 4 measures per day to 5 measures, and women an increase to 3 measures for threshing.

While wages in the village do not vary directly with the caste of the worker, discrimination against the scheduled castes, the overwhelming majority of whom are landless labourers, is deeply entrenched. Most of the farm servants in the village are Dalit.

Selvam has an extremely busy working year. During the 1976-7 agricultural year, he worked on both crops of paddy on surface-irrigated land, in different operations in the cultivation of irrigated sorghum (cholam), finger millet (ragi), tomato, and banana on groundwater-irrigated land, and in little millet (samai) on unirrigated land. In addition to agricultural work every day, he did domestic tasks at the landlord’s house. Selvam’s wife Alphonse laboured at agricultural operations for 57 days in 1976-7, and earned Rs 158.70 as wages. She seeded and cleaned tamarind for 3 days, for which she earned Rs 7.50.

Selvam’s wage is lower than other farm servants in the village, some of whom are paid Rs 130 and Rs 140 by their landlord employers. But when Selvam asks for a wage increase, the landlord arrogantly insists: “I have already increased your wages. You used to get Rs 65, now you get 110.” The standard that SCC uses, Selvam says, is not the wage paid to other farm servants in the village, but the Rs 65 pittance that Selvam himself used to receive before he was paid Rs 110 a month.

When Selvam is unwell, the landlord may give Selvam a small amount of money to buy medicine, but he will not pay for treatment for Alphonse or the children when they fall ill.

As for his home, Selvam cannot afford to erect a complete hut. When he gets a small amount of money, he adds a row of bricks to the hut. Some months ago, he bought a door-frame. Now there is a door-frame, fixed with mud into a few rows of country-made brick, with no wall around it or roof above. The single room in the hut is 8 feet by 6 feet. “We do not know when this hut will be built,” Alphonse said. “We lay a few bricks, and it may be a few months before we can add more bricks. It may take years to complete the hut in this manner.”

With all this, Selvam must also face rudeness and shouts from the landlord, the loud arrogance of SCC as taskmaster of “his” farm servant.

“Life is difficult for me,” Selvam said. He sees his children at 5 a.m. (when he leaves the house), when the older children may be just beginning to wake up. It is seldom, and only in the slack season, that he comes home before they are asleep for the night. And the hours in between are filled with arduous, back-breaking labour that covers every task that an agricultural labourer in the village can perform.

I have seen Selvam, early in the morning, heaving farmyard manure on to a cart and driving the cart to the paddy-fields, unloading it in neat piles across the field. I have seen him, bare-chested, barefoot, and dressed in an old and torn lungi, with a soiled cloth on his head to protect him from the sun, walking with a hoe across his shoulder over the ridge east of the village on the road leading to SCC’s groundwater-irrigated field in neighbouring Anamalaiyanpatti. I have seen him at the field, cutting and clearing water channels before the electricity comes on and irrigation water rushes up; and in the banana field, hacking at the tough young shoots that grow by the banana trees, cutting dry and withered leaves off the tree, and straightening tree trunks with wooden props that have been chopped and shaped by him. I have seen him, in the evenings, working in SCC’s house, watering, feeding, and washing the cattle or chopping a tree trunk for firewood for SCC’s kitchen. I have seen him at the bus-stop in Uthamapalayam, straining to lift a motor pump, newly repaired, on to the carrier of a Gokilapuram-bound bus. Standing under a bus-shelter in Gokilapuram after 11 o’clock at night, I have heard the sound of a cart coming down the road from Anamalaiyanpatti. It is Selvam, urging the bullocks through pouring rain back to the house of SCC. I have seen him after 11.30 at night, rain smudging the red mud that clings to his face and body, entering his hut and eating gruel and pickle by the weak light of an oil lamp, and preparing to catch some sleep before the next day of labour begins.

Selvam states clearly that it is not “loyalty” that keeps him with the landlord. It is his debt and the difficulty of finding alternative employment if he were to leave. “I have heard of the union of agricultural labourers in East Thanjavur. A union is needed, unity of agricultural labourers is needed. If there were a union in Gokilapuram, I would join it.”

May 1977

2017: A Working Life

Selvam worked for a total of 13 years with SCC. When he left, he was paid a mere Rs 400 a month. Selvam said that about 4000 rupees were due to him and unpaid when he left SCC’s employment.

Selvam worked 15 years as a daily worker after he left the employment of SCC. Three years after he left, Selvam’s son Arokiyasami was married. Over the three years, Selvam spent one year as a worker in a cardamom estate in Parathodu in Kerala, owned by Shanmughavel of Pannaipuram.

Alphonse worked as a wage labourer all her working life, that is, until four years ago.

Ten years ago, Selvam began to work for Venkatesan, a retired college teacher. Selvam was hired at a wage of Rs 2000 a month. Venkatesan owns 10.8 acres of thottam land and 1.8 acres of nanjai land in the north of the village, on the banks of the Thamaraikulam irrigation tank, where he grows nendran banana and coconut.

Selvam comes to the field at 7 am every day, takes a break from about 11:00 to 2:30, and works again at the field till 6 pm. He takes care of the field, clears the channels for irrigation, works the locks of the pipes for drip irrigation, supervises and works with other wage workers at some operations (planting and harvest), and weeds and cleans the fields. He also keeps the main trunks of the banana trees free of unwanted side-shoots, and applies fertilizer and undertakes all other plant protection tasks.

After three years with the landlord, Selvam asked for a raise. His new wage was fixed at Rs 4,000 a month (the worker on the neighbouring field gets Rs 6,000 a month, he told us). The landlord agreed, and said that he would henceforth account for Selvam’s withdrawals against the new wage. For Selvam is not paid his wage on a fixed day every month. He takes money for expenses from the owner “whenever I need it,” for household expenses, for festivals. The employer says he is keeping an account; Selvam trusts him and says that he, too, keeps track of how much he has taken from the landlord. He estimates that he has credit of about Rs 10,000 with the landlord. There is no formal account of Selvam’s savings with the landlord.

Four years ago, Alphonse developed a swelling on her right knee. A doctor in Uthamapalayam gave her drugs and an injection, and the swelling “sank to her foot.” Blood and pus was drained with a large syringe from the foot. Alphonse was discharged from the hospital, and was told to spread an ointment on the wound. Selvam did this every day. Alphonse began to scratch the itchy wound before it had healed completely. She eats betel leaf and nuts with lime, and the lime paste on her finger began to inflame the wound. It turned septic. Selvam took her in his son Sekhar’s autorickshaw to Cumbum, where the doctor said that she needed emergency treatment at Theni. Alphonse was taken by ambulance to the Theni Government Medical College and Hospital, where the doctors advised emergency surgery. She had a second surgery, followed by a skin graft.

In the post-operative ward, Selvam watched people on the other beds, and began to realise the importance of dressing Alphonse’s wound correctly – that it was a task that needed an expert, something he could not do himself. He hired a person to change the bandage – at Rs 50 a day – for the three months they spent in the hospital.

Alphonse is back home now. She can move a bit – to the sitting platform in front of the house, to change her clothes, to go to the bathroom; but not more than that. “We do not know how long she will survive. She has never done anyone any wrong. When she goes, it will be to heaven.”

The Children

Arokiasamy (50), the oldest child of Selvam and Alphonse, works as a mason and has a small business as a contractor for constructing small houses. His wife, Sumathi, has a tenth class school-leaving certificate, and works in the panchayat office as a data collector. They have two children, a son, Maniprathi (22), now a student at a polytechnic in Namakkal, and a daughter, Sunitha (21). Sunitha completed a B. A. degree and is now married. Her husband works on the staff of a tea estate owned by N Ramakrishnan, former MLA from Cumbum.

Arokiamary (48), the only daughter of Selvam and Alphonse, is now almost completely blind. She looks after her parents and brother, the much-loved carer in the home.

Shekhar (46) lives in Gokilapuram. He owns an autorickshaw, from which he which earns an income of Rs 500 to Rs 1000 a day. His wife, Thilakam, is a manual worker in agriculture and at non-agricultural tasks. Their children, Merlyn Marcia and Praveen, their grandparents’ joy, study in class 1 and class 2 in the English-language medium section of the Savarimuthu Udayar Memorial Higher Secondary School, a reputed school in the neighbouring village of Rayappanpatti.

Vedamuthu (44) stays at home with his parents. He is a person with intellectual disabilities, and is unable to go regularly to work.

Xavier (41), the youngest son of the family, works at loading and unloading bags of rice at the government civil supplies godown in Uthamapalayam. His wife Muthuarokiyam and he are now residents of Uthamapalayam, where his children Akhilesh, Vimalesh, and Pratibha go to school. Xavier earns 600 rupees a day, and an extra 1000 rupees a month for the manual work at the godown.

Forty Years On

Selvam and family live today in the house whose initial construction costs led him into bondage in 1977. It is completed and expanded now, a neat whitewashed structure that has the meagre furniture and appurtenances of a house that is still, after all, the house of a full-time rural manual worker. They were exploited and extremely poor – near destitute – in 1977. Today, they are still poor, Selvam’s wages are low, and he has no knowledge of how much of his earned wages are held by his employer. But he is no longer destitute, no longer in bondage, and no longer at the mercy of a harsh and cruel landlord of the old type.

They are better off now than they were in 1977 – oh yes, of course we are, Selvam says. Our house is complete, and we never go hungry, we have special things to eat: egg curry twice a week, chicken on Sundays, fish once in about twenty days. Thanks to the public system for the distribution of cereal, there is enough rice for the family. The house has been electrified (Selvam says that they received their electricity connection at the same time, conveniently, as their son Arokiasami’s wedding).

I have continued to meet Selvam over the years. I was associated with resurveys of Gokilapuram village in 1986 and 1999, and continue to be interested in changing agrarian relations in the village and region. I return to the Cumbum Valley regularly for tasks connected with the Gokilapuram Educational Trust, an organisation of which the honoree of this volume is a founder trustee. Travel to the Valley gives me an opportunity to keep in touch with Selvam; as we grow older, we grow more conscious of the value of old friendships.

Selvam asks me if I remember the little kerosene lamp (of course I do -- made of tin and with a flimsy glass chimney) that I used during our survey in 1977. I used it after dark during conversations and interviews in homes that had no electricity. You gave it to me when you left the village after the survey, he says. After electricity came to the house Selvam stored the lamp deep in a loft, where it remains today. He keeps it as a reminder of his friend -- and of the days when they had only a single lamp for light in a half-constructed house.

December 2017

Why a war on poor people?

American conservatives for the past several decades have shown a remarkable hostility to poor people in our country. The recent effort to slash the SNAP food stamp program in the House (link); the astounding refusal of 26 Republican governors to expand Medicaid coverage in their states -- depriving millions of poor people from access to Medicaid health coverage (link); and the general legislative indifference to a rising poverty rate in the United States -- all this suggests something beyond ideology or neglect.

The indifference to low-income and uninsured people in their states of conservative governors and legislators in Texas, Florida, and other states is almost incomprehensible. Here is a piece in Bustle that reviews some of the facts about expanding Medicaid coverage:

In total, 26 states have rejected the expansion, including the state of Mississippi, which has the highest rate of uninsured poor people in the country. Sixty-eight percent of uninsured single mothers live in the states that rejected the expansion, as do 60 percent of the nation’s uninsured working poor. (link)

These attitudes and legislative efforts didn't begin yesterday. They extend back at least to the Reagan administration in the early 1980s. Here is Lou Cannon describing the Reagan years and the Reagan administration's attitude towards poverty:

Despite the sea of happy children’s faces that graced the “feel-good” commercials, poverty exploded in the inner cities of America during the Reagan years, claiming children as its principal victims. The reason for this suffering was that programs targeted to low-income families, such as AFDC, were cut back far more than programs such as Social Security. As a result of cuts in such targeted programs-including school lunches and subsidized housing-federal benefit programs for households with incomes of less than $10,000 a year declined nearly 8% during the Reagan first term while federal aid for households with more than $40,000 income was almost unchanged. Source: The Role of a Lifetime, by Lou Cannon, p. 516-17, Jul 2, 1991

Most shameful, many would feel, is the attempt to reduce food assistance in a time of rising poverty and deprivation. It's hard to see how a government or party could justify taking food assistance away from hungry adults and children, especially in a time of rising poverty. And yet this is precisely the effort we have witnessed in the past several months in revisions to the farm bill in the House of Representatives. In a recent post Dave Johnson debunks the myths and falsehoods underlying conservative attacks on the food stamp program in the House revision of the farm bill (link).

This tenor of our politics indicates an overt hostility and animus towards poor people. How is it possible to explain this part of contemporary politics on the right? What can account for this persistent and unblinking hostility towards poor people?

One piece of the puzzle seems to come down to ideology and a passionate and unquestioning faith in "the market". If you are poor in a market system, this ideology implies you've done something wrong; you aren't productive; you don't deserve a better quality of life. You are probably a drug addict, a welfare queen, a slacker. (Remember "slackers" from the 2012 Presidential campaign?)

Another element here seems to have something to do with social distance. Segments of society with whom one has not contact may be easier to treat impersonally and cruelly. How many conservative legislators or governors have actually spent time with poor people, with the working poor, and with poor children? But without exposure to one's fellow citizens in many different life circumstances, it is hard to acquire the inner qualities of compassion and caring that make one sensitive to the facts about poverty.

A crucial thread here seems to be a familiar American narrative around race. The language of welfare reform, abuse of food stamps, and the inner city is interwoven with racial assumptions and stereotypes. Joan Walsh's recent column in Salon (link) does a good job of connecting the dots between conservative rhetoric in the past thirty years and racism.  She quotes a particularly prophetic passage from Lee Atwater in 1982 that basically lays out the transition from overtly racist language to coded language couched in terms of "big government".

Finally, it seems unavoidable that some of this hostility derives from a fairly straightforward conflict of group interests. In order to create programs and economic opportunities that would significantly reduce poverty, it takes government spending -- on income and food support, on education, on housing allowances, and on public amenities for low-income people. Government spending requires taxation; and taxation reduces the income and wealth of households at the top of the ladder. So there is a fairly obvious connection between an anti-poverty legislative agenda and the material interests of the privileged in our economy.

These are a few hypotheses about where the animus to the poor comes from. But there is an equally important puzzle about the political passivity of the poor. It is puzzling to consider why the millions of people who are the subject of this hostility do not create a potent electoral block that can force significant changes on our political discourse. Why are poor people in Texas, Florida, and other non-adopting states not voicing their opposition to the governors and legislators who are sacrificing their health to a political ideology in the current struggles over Medicaid expansion?

Two factors seem to be relevant in explaining the political powerlessness of the poor. One is the gerrymandering that has reached an exact science in many state legislatures in recent years, with unassailable majorities for the incumbent party. This means that poor people have little chance of defeating conservative candidates in congressional elections. And second are the resurgent efforts that the Supreme Court enabled last summer to create ever-more onerous voting requirements, once again giving every appearance of serving the purpose of limiting voter participation by poor and minority groups. So conservative incumbents feel largely immune from the political interests that they dis-serve.

This topic hasn't gotten the attention it deserves in studies of American politics. One exception is the work of Frances Fox Piven and Richard Cloward. In Poor People's Movements: Why They Succeed, How They Failthey offer a powerful interpretation of the challenge of bringing poverty into politics.
Most poor people are "working poor" and are not homeless. But there are hundreds of thousands of homeless people in the United States, and their living conditions are horrible. Here is a powerful and humanizing album that captures some of the situation of homeless people in America. Give US Your Poor is worth listening to. Here is the title clip of the album:

http://www.youtube.com/watch?v=rfeALzkl9TI

Poverty and economics

How important should the subject of poverty be within the discipline of economics? Some economists appear to think it is a very small issue compared to the magnificent mathematics of general equilibrium theory. Others believe that economics should fundamentally be about the sources of human well-being and misery, and that understanding poverty is absolutely fundamental for economics. How should we try to sort this out?

Among the contemporary economists who have given the greatest attention to poverty and deprivation, Amartya Sen and Jean Dreze are particularly outstanding. Their research on well-being, quality of life, and hunger set a standard for the point of view that says that life quality and deprivation need to be at the top of the list of economic research goals. Here I'm thinking of books like Inequality Reexamined, Poverty and Famines: An Essay on Entitlement and Deprivation, and Hunger and Public Action.

The neoclassical free market purists stand at the other end of the garden.  The economists of the Chicago School put primary emphasis on the beneficent effects of untrammeled market behavior, and they give little attention to the "market imperfections" that poverty and deprivation represent. (The word "poverty" does not occur in the index of John Van Overtveldt's good intellectual history of the Chicago School, The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business.) Poverty seems to be viewed as a normal and fair result of the workings of market institutions: some people make large contributions and earn high income, and others make small or zero contributions and earn low income.

The closing chapter of Milton Friedman's Capitalism and Freedom is entitled "The Alleviation of Poverty." Here Friedman admits that poverty is a problem, but conceives of only two solutions: private charity (which he agrees will not work in a large complex society) and direct transfers from tax revenues to payments to the poor (which is limited by the willingness of citizens to provide taxes for this purpose). The mechanism he prefers is a negative income tax: persons with incomes below a given threshold would receive payments determined by their income levels. "In this way, it would be possible to set a floor below which no man's net income (defined now to include the subsidy) could fall" (192).

What this analysis leaves out is any consideration of the economic mechanisms that produce poverty within an affluent society, and how institutions could be adjusted so that poverty and inequality tended to fall over time as a consequence of the normal workings of economic institutions. Take race in America, for example -- a set of institutions that many observers see as being crucial mechanisms in the production of urban poverty. Writing in 1962, Friedman argues that racial discrimination in employment is essentially impossible within a competitive market system (link). But we now understand the geography and social structuring of poverty much better. Racial segregation in housing has not disappeared; it has only worsened. Low-quality and ineffective schools are concentrated in low-income and racially segregated neighborhoods, so poor people have reduced educational opportunities. Access to jobs is also constrained by geography and educational opportunity. (Here is a recent post on the mechanisms of racial disparities; link). So it seems clear that our economy systematically reproduces poverty in inner cities rather than reducing it. And the situation of rural poverty is not substantially better.

This all has to do with the dynamics of income at the bottom end. But we have also seen persistent widening of income at the top end. American capitalism has produced ever-widening inequalities of income for at least the past forty years. Consider these two graphs of income by percentile provided by Lane Kenworthy:

(Source: Lane Kenworthy, Consider the Evidence blog (link))

So the idea that a properly functioning market economy will tend to reduce poverty and narrow the extremes of income inequality has been historically refuted -- at least in the case of American capitalism.

It is apparent that the ills of poverty are debilitating to the families who experience it; their quality of life is dramatically lower than it needs to be in an affluent society. So that is one reason for economists to give higher priority to the study of the mechanisms and structures that reproduce poverty in the United States. But there is a more systemic reason as well: if 15% of all Americans live in poverty (46 million people), and if 22% of children live in poor households (16 million children), this implies a huge drain on the productive capacity of the American economy. Education, health, and inclusion are important components of economic growth; and each of these is harmed by the persistence of poverty. So economists ought to be in the lead when it comes to placing a priority on poverty research.

We need to have a much more systematic understanding of the institutions and structures through which access to income and the necessities of life is created. And this implies that the mainstream might be well advised to take counsel from structuralist economists like Lance Taylor. Here is how Taylor describes the intellectual foundations of structuralist macroeconomics in Reconstructing Macroeconomics: Structuralist Proposals and Critiques of the Mainstream:

In the North Atlantic literature, structuralism's intellectual foundations lie within a complex described by labels such as [original, neo-, post-]-[Keynesian, Kaleckian, Ricardian, Marxian] which nonmainstream economists have adopted; numerous variants exist in developing countries as well. The fundamental assumption of all these schools is that an economy's institutions and distributional relationships across its productive sectors and social groups play essential roles in determining its macro behavior. (1)

This emphasis on study of the concrete institutions embodied in a given economy, and the distributive characteristics that these create, seems like a very good starting point for arriving at a better understanding of the economic foundations of poverty than we currently have.

Urban marginality

If you live within the reach of a major American city -- and most Americans do -- then you know what "marginality" is. It is the sizable sub-population of metropolitan America of young men and women who have been locked out of what we think of as the indispensable mechanisms of social mobility: decent education, healthcare resources, job opportunities, and safe neighborhoods. It is the young people of inner-city Baltimore depicted by The Wire. (Take a look at Richard Florida's detailed analysis of the spatial class structure of Detroit and a number of other cities; link.) The facts of compacted poverty and lack of opportunity, and the disaffection of young people that goes along with these absences, represent one of the most pressing social problems we face.

How should we go about studying and changing this appalling social reality? Alford Young's The Minds of Marginalized Black Men: Making Sense of Mobility, Opportunity, and Future Life Chances is one striking approach, using extended interviews to gain insight into the minds, worldviews, and social realities of some of these young people. (Here is an earlier discussion of Young's work; link.) Another approach is the large body of mainstream poverty research in the social sciences and policy studies. (Here is a penetrating critique of some of the assumptions of this research by Alice O'Connor; Poverty Knowledge: Social Science, Social Policy, and the Poor in Twentieth-Century U.S. History.) But an important and original voice on these issues is that of Loïc Wacquant, and particularly important is Urban Outcasts: A Comparative Sociology of Advanced Marginality (2008).

Wacquant's Ph.D. work was done at the University of Chicago (like Young's), and he too immersed himself in the street-level realities of segregated, impoverished Chicago. Wacquant's approach was a novel one: he took up boxing in an inner city boxing club to gain access to the ordinary lives of the young men of the neighborhoods. His ethnography of this experience was published in the fascinating book, Body and Soul: Notebooks of an Apprentice Boxer.

Wacquant is French and comparativist; he is interested in investigating the experience of marginality in the United States and comparing it with equally marginalized neighborhoods in France, the banlieue of Paris. (Here is an earlier post on the banlieue and the sociological research of Didier Lapeyronnie's Ghetto urbain; ségrégation, violence, pauvreté en France aujourd'hui.) In each instance modern cities are found to have large populations of apparently permanently marginalized under-class people. Here is how Wacquant frames the issue in "The Rise of Advanced Marginality: Notes on its Nature and Implications" (link) (1996):

The resurgence of extreme poverty and destitution, ethnoracial divisions (linked to the colonial past) and public violence, and their accumulation in the same distressed urban areas, suggest that the metropolis is the site and fount of novel forms of exclusionary social closure in advanced societies. (121)

But Wacquant's summary finding is perhaps a surprising one: he finds that the "Black Belt" in Chicago and the "Red Belt" of Paris are substantially different social phenomena. Rather than a homogeneous social reality of "ghetto" extending from Chicago to London to Amsterdam to Paris, he finds a differentiated social reality:

A paired comparison between neighborhoods of relegation in Chicago's 'Black Belt' and the Parisian 'Red Belt' shows that the declining French metropolitan periphery and the Afro-American ghetto remain two sharply distinct sociospatial constellations. And for good reason: they are heirs to different urban legacies, produced by different logics of segregation and aggregation, and inserted in different welfare state and market frameworks, all of which result in markedly higher levels of blight, segregation, isolation, and distress in the US ghetto. (122)

Wacquant introduces the idea of "advanced marginality" to describe the social reality of isolation and deprivation created by advanced capitalism in the rich cities of the North. Here are the criteria he offers for a social system embedding advanced marginality:

• the growing internal heterogeneity and desocialization of labor,
• the functional disconnection of neighborhood conditions from macro-economic trends;
• territorial fixation and stigmatization; spatial alienation and the dissolution of place;
• the loss of a viable hinterland; and
• the symbolic fragmentation of marginalized population (121)

An element that Wacquant finds to be in common across advanced marginality in modern cities is what he calls "territorial fixation" -- the confinement of the marginal in specific neighborhoods of the city.

Rather than being diffused throughout working class areas, advanced marginality tends to concentrate in well-identified, bounded, and increasingly isolated territories viewed by both outsiders and insiders as social purgatories, urban hellholes where only the refuse of society would accept to dwell. (125)

In Urban Outcasts Wacquant provides a much more developed comparative sociology of marginalized urban populations. It is significant that he begins his treatment of marginality with the topic of riot and uprising -- a recurring social reality in the United States (Chicago, Watts, Detroit, ...), London, Strasbourg, and Paris. This seems significant, because it seems like a logical correlate with the deprivation and stigmatization associated with advanced marginality.

Most of the disorders, big and small, that have shaken up the French working-class banlieues, the British inner city and adjacent barrios of North American have involved chiefly the youths of impoverished, segregated and often dilapidated urban neighbourhoods caught in a spiral of decline; they appear to have been fuelled by growing ethnoracial tensions in and around those areas. (20)

And Wacquant thinks these uprisings stem from three large social causes: mass unemployment, relegation to decaying neighbourhoods, and heightened stigmatization in daily life of the marginalized young people (25). He quotes a young man from Bristol:

I don't have a job and I'll never have one. Nobody wants to help us get out of this shit. If the government can spend so much money to build a nuclear submarine, why not for the inner cities? If fighting cops is the only way to get heard, then we'll fight them. (31)

This is a superb piece of sociology, making use of multiple means of inquiry (ethnographic, comparison, statistical) to arrive at credible theories of the causes of urban marginality. And, contrary to the critique offered by O'Connor of mainstream poverty studies, there is not an ounce of "blaming the poor" in this study. Wacquant wants to understand the social processes that create and reproduce the urban spatial reality of marginality. And in doing this, he aims to provide some of the understanding we will need to begin to take this system apart.

Excerpt The Wire

What became of Detroit?

As Detroit approaches a new turn in its difficult journey over the past several decades, the imposition of an Emergency Financial Manager by the governor of Michigan (link), many people are asking a difficult question: how did we get to this point?

The features that need explanation all fall within a general theme -- the decline of a once-great American city. The city's population is now roughly 40% of its peak of almost two million residents in 1950 (link); the tax revenues for city government fall far short of what is needed to support a decent level of crucial city services; the school system is failing perhaps half of the children it serves; and poverty seems a permanent condition for a large percentage of the city. The decline is economic; it is political; it is demographic; it is fiscal; and it is of course a decline in the quality of life for the majority of the residents of the city. The poverty, unemployment, poor housing, poor health, and high crime that characterize the city must surely have an explanation.

There are several standard lines of interpretation that Michiganders offer each other -- the decline of manufacturing and the auto industry; the workings of race and white flight; the uprising of 1967; ineffective and corrupt city management; and a long and debilitating contagion of rustbelt-itis in common with Cleveland, Peoria, and Gary. Each of these has a role to play in the explanation, but it is complicated to see how these factors may have intertwined in the half-century of change that led to the Detroit of 2013.

The decline of manufacturing employment in Detroit and its inner suburbs is certainly a contributing factor to the economic decline of the city of Detroit, but these changes by themselves do not account for the major contours of Detroit's economic decline. In a careful review article on manufacturing employment in Michigan (link), Richard Block and Dale Belman show that the decline of vehicle manufacturing employment for the state of Michigan as a whole was measurable but slow between 1980 and 2001 (152). The loss of jobs has been much more significant since the beginnings of the 2007 recession; but Detroit's decline was well underway by 2007.

What about race and white flight? Certainly Detroit is a much more racially segregated city than it was in 1960, and this increase reflects the relocation of a substantial part of the white population to the affluent suburbs. So white flight is a fact. This racial demographic shift is often attributed to the aftermath of the 1967 uprising. But Tom Sugrue documents very convincingly that this process was already well underway by 1967. White flight predates the occurrence of the uprising by at least a decade (The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit). This transformation of racial demography seems to reflect the vicious circle of urban change that characterizes several of the processes mentioned here. People care about the urban environment in which they live, and if they are unsatisfied and financially able, they will relocate to neighborhoods that provide better quality of life for them. But often their relocation leads to a slight worsening of the environment for others in the neighborhood, leading to a growing flow outward of the more affluent residents. Unfortunately in Detroit's history (like that of many other Midwestern cities) some of those preferences have to do with the racial composition of a neighborhood, resulting in out-migration that is disproportionately white and affluent. But this process has important consequences. Sustained shifting of patterns of residence that result in increasingly impoverished neighborhoods in the central city lead to decline quality of life and declining tax revenues for the city, and another round of relocation.

Another vicious circle in Detroit concerns schooling. The funding of the Detroit Public School system depends on the enrolled student count. Each year for at least the past ten years this count has been lower than the prior year. This means a continuing fiscal crisis for the schools, and a continuing downward spiral of funding and school population. Parents perceive lower quality as a result of reduced funding; they find alternative schools for their children; and the count declines further. But crucially, the quality of schools is a key determinant of the quality of life of a city and its attractiveness as a destination for young families. So declining school quality reinforces population loss.

Another important factor is the quality of housing and neighborhoods in the city. The city has a legacy of blight and decay that is very costly to deal with. The precipitous decline of population has left large parts of the city very sparsely populated, with a high number of abandoned buildings and vacant lots. This low density residential pattern makes it costly to deliver basic urban services like police, fire, sanitation, and infrastructure maintenance. So in addition to a declining tax base, the city has to deal with the challenge that its urban geography implies that services will cost more per capita than they do in more densely populated cities.

So what about the creation of new jobs as a way of combatting these downward spirals? Employers need a well educated workforce. Detroit's ability to educate its children and young adults is impaired; rates of basic literacy are low; and therefore it is difficult to persuade employers to establish new activities in the city. So it is predicable that job growth in the city will be slow.

Finally, what about waste, mismanagement, and fraud in city government? Is this a primary cause of Detroit's decline? Certainly there are examples of each of these problems in Detroit's history. The current trial of former mayor Kwame Kilpatrick lifts the veil from some of these practices. But the current mayor's administration has a good reputation, and it hasn't been possible for the city to make progress on its fiscal crisis during his administration either. Bringing the volume of waste, mismanagement, and fraud down to "normal" levels won't solve the city's fiscal crisis.

If I had to single out a single fact out of this complicated story as the most important factor that led to these toxic changes, I would identify the mechanisms of racial residential segregation that Detroit has embodied for almost a century. For decades Eight Mile represented a key racial division in the city, and a plethora of mechanisms of exclusion conspired to maintain this division. If the city could have settled into a racially and economically mixed pattern of residence in the 1940s, much of this story would have been different. Population exit would not have reached crisis proportions; businesses would have been less likely to relocate out of the city; and a schooling system that was very successful in the 1950s could have maintained its effectiveness. This implies that Detroit is victim to the continuing tragedy of America's inability to heal its racial divisions and antagonisms. Doug Massey and Nancy Denton got it right in their important book, American Apartheid: Segregation and the Making of the Underclass:

Segregation increases the susceptibility of neighborhoods to these spirals of decline. During periods of economic dislocation, a rising concentration of black poverty is associated with the simultaneous concentration of other negative social and economic conditions. Given the high levels of racial segregation characteristic of American urban areas, increases in black poverty such as those observed during the 1970s can only lead to a concentration of housing abandonment, crime, and social disorder, pushing poor black neighborhoods beyond the threshold of stability. (13)

So how can Detroit imagine reversing this downward spiral? It's easy to say, though not easy to implement. If Detroit could improve its ability to provide decent, effective education for its children through graduation from high school, and if it could create a process through which tens of thousands of new jobs were created for young people every year, then much of the rest of the picture would change as well. Detroit's young people need education and opportunity; with these assets, they can make their city sing again.