Rich America, Poor America - Niall Ferguson

There are some tidbits in this column worth exploring when I have a bit more time.

Rich America, Poor America - The Daily Beast

Niall Ferguson uses the publication of Charles Murray's Coming Apart as a starting point for an analysis of the left-right divide on the causes and cures for income disparity in the United States.

Ferguson begins with a clear summary of the problem. There is no question families are drifting further apart at the extremes of the income scale. This is not a 1 percent versus the 99 percent issue, it is most extreme at the top 0.01% and the bottom 10% according to most economists. The bottom is falling, skewing averages, and the top is… well, read for yourself:

Adjusted for inflation, the income of the average American male has essentially flatlined since the 1970s, according to figures from the Census Bureau. The income of the bottom quarter of U.S. families has actually fallen. It’s been a different story for the rich. 

According to recent work by Berkeley economist Emmanuel Saez, the share of total income going to the top 1 percent of families has more than doubled since 1979, from below 10 percent to a peak of nearly 24 percent in 2007. (It has since fallen, but not by much.) The share going to the super-rich—the top 0.01 percent—has risen by a factor of seven.

The question is, how do you nurture a better culture to help people rise? I'd rather see everyone earn more than solve the disparity by redistribution. As Ferguson summarizes the left-leaning position, which I believe has failed and will continue to fail:

Left-of-center economists like Paul Krugman and Jeffrey Sachs explain this phenomenon with the following story. Financial deregulation by Ronald Reagan ushered in an era of rampant greed in finance; meanwhile, Republicans ruthlessly hacked back New Deal and Great Society social programs to finance tax cuts for their Wall Street cronies. 

To make their point, liberals point to European countries like Denmark, Sweden, and the Netherlands, where the rich have not been getting richer and social mobility remains high. Conclusion? America needs European-style policies like the ones listed by Krugman in a recent column: “more nutritional aid for low-income mothers-to-be and young children…[improved]?public schools…aid to low-income college students…[and] a universal health care system.” And how would that all be paid for? You guessed right: higher taxes on the rich.

Murray would not be my primary source for an argument on income and intelligence, because I believe he mistakenly confuses cultural effects for genetic effects. At least Murray (and most libertarians) recognize culture is a major factor in class mobility. I've written many, many times that marriage and wise choices predict financial standing and mobility.

Here's the problem, simplistically I admit:

The upper-middle and upper-class in the U.S. (and in Europe, by the way) tend to come from more stable homes. They are more likely to have married parents. Their parents are more likely to have completed high school and some college. The parents are likely to be "traditional" regardless of left/right divisions.

My own parents? Married 46 years this year. My wife's parents? Also married for more than 45 years. My wife's father has some college (an associate's degree) as does my father (also an associate's degree). Our parents were "traditional" though neither of our families attends church or belongs to the old-line service organizations (Lions, Rotary, et cetera). Our families ate dinner together and parents asked children about school work. There were chores and there were consequences for mistakes.

According to Murray and other scholars, this background represents a statistically significant advantage over others. Yes, there are always exceptions. Single-parents can and do raise successful children — that isn't the argument. The argument is that you are more likely to rise socially and financially if your family provided certain supports and demonstrated the value of an education.

While our parents didn't have bachelor's degrees, our fathers both demonstrated that education does correspond to advancement. Therefore, my wife and I were more likely to attend college. We not only attended college, but we attained a "higher level" of education than our parents. That's one potential marker of social mobility.

Of course, people meet in school and tend to marry within the same educational background. That's not snobbery or anything: people meet where they live and congregate. People with college degrees meet in college or at work or among other college-educated friends. The advancement of my wife and I means we are now surrounded by "better educated" individuals.

Being surrounded by yet more educated people reminds us that yet more education might be beneficial. The result? My wife has a master's degree and I have a doctorate. Among our friends and colleagues, we are typical. One of the couples we know includes a wife with a doctorate and husband with an applied master's. We are not outliers in our social circle. To us, education has become "the norm" even though only 2% of American's have doctorate or terminal degree.

As Ferguson then writes:

Not content with being educated together and then marrying each other, members of the cognitive elite then proceed to work together and to live in the same neighborhoods, which Murray calls the “SuperZips” (the 882 richest zip codes in America). The resulting class of “Overeducated Elitist Snobs”—especially the ones living in Beverly Hills, Santa Monica, Malibu, Manhattan, and Boston—tend to be markedly more liberal than the national average. But this is mainly because, thanks to a new segregation along class lines, they “have little direct experience with the lives of ordinary Americans.”

Sure enough, my wife and I have lived in "enclaves" of the educated. We lived in a neighborhood of Minneapolis with an emerging "educated elite" of 30 and 40-something couples. Trust me, Minneapolis is as blue as blue gets, while Minnesota is more divided. The educated class, the "cognitive class" as Murray suggests, tends to be idealistic and left-leaning. Of course, what happens when people of any viewpoint congregate? They start to reinforce their beliefs, so the left/right sorting of America leads to more extreme left and more extreme right in some communities. (We see this in the U.S. House of Representatives, since districts are slowly "sorting" into left/right divisions.)

If my wife and I had children, they would likely attend college and sort themselves in a similar or even more pronounced manner.

Ferguson asks:

So what is to be done to heal the rift between Rich America and Poor America? There are two obvious problems with the standard liberal prescription of increased welfare spending, financed by higher taxes on the rich. The first, as Murray points out, is that the welfare programs of the Great Society era were in many ways the cause of the breakdown of social order in working-class America. 

The second is that this is a very strange time to want to import the European welfare state, with its aspiration to provide everyone with comfort and security from the cradle to the grave. In case you hadn’t noticed, that system is currently on the brink of fiscal collapse in its continent of origin.

My personal view is simple: education, education, education. When you can automate most manual tasks, and when even some simple "intellectual" tasks can be computerized, the only path from one class to another — and the only hope of remaining in the middle or rising — is education. The only way to avoid losing ground, economically and socially, is to be heading into the cognitive elite.

Our schools are failing the middle- and lower-class students. We might want to claim otherwise and swear that "our schools" are fine (it is always the "other schools" that are failing, but the truth is clear: our students are not performing well in science, math, history, or the language arts. Our solutions, testing and focusing narrowly on math and reading, are also failing.

If we want to change things, our schools need to change. Not only do our K–12 schools need to change, but our universities need to be mindful that we are losing science, technology, math, and engineering students. I'll be blunt: my English degree is not what this nation really needs. While I believe in a liberal arts undergraduate degree with no major (I'd love to scrap the entire "Choose your major!" nonsense from undergraduate programs), at the graduate level we need to be leaders in the STEM fields.

Our public schools are not fostering scientists, engineers, and the next generation of inventors.

I'm a computer "geek" and my wife is an engineer. I developed my love for computers from my father, a subscriber to Popular Science, Popular Mechanics, and every DIY catalog (Heathkit-Zenith) of the 1970s. My father is a tinkerer, a let's build it and test it person. I grew up with model rockets, Erector sets, and other gadgets. My wife's father restored tractors and loves a mechanical challenge.

Both of our mothers are readers. My mother insisted on trips to the library. My wife's mother owns a used bookstore. Reading is essential to success.

Our parents were our role models.

You want to close the income divide? Educate and inspire the next generation. That won't be easy, but we must do it.