In the past quarter-year or so, the economic news for the United States has been unpredictable. The end of 2011 and the very beginning of 2012 brought reports of sustained if not extraordinary growth, but it was the jobs numbers that inspired so many to once again adopt the cautious optimism that was so premature during 2010’s “recovery summer.” For the first time in a long time, the end of last year and the start of this one featured Americans getting hired at a rate that, if not robust, would nevertheless have been deemed acceptable in the years before the Great Recession.
Then came March’s tepid results; and we seem once again to be merely treading water.
I believe that part of what’s made this endless wait for jobs to return so exasperating is the knowledge most of us have, barely hidden under the surface, that we’re waiting in vain. It reminds me of the troubleshooting routines we all slog through when a computer or iPod won’t work, before admitting that it’s beyond our saving and pulling out our wallets. Ever since the White House’s 2009 stimulus bill proved unable to nurse our economy back to health, we’ve been running one time-consuming and patently inadequate troubleshooting test after another.
What the hell’s keeping us from facing up to reality? It’s not as if no one knows what to do; until the latest downturn, there was a broad consensus in favor of stimulative policy in response to economic strife. And it’s not as if the public’s indifferent to the wan job market; the economy and/or jobs has been the number one issue on the public’s mind for years. So why does Washington continue to stand pat? What explains this protracted lurch towards stagnation and mediocrity?
To my mind, this has been the most vexing and important question of the Obama Presidency. The vexation is obvious, but the true importance of discovering its source may not be so clear. There’s always the idea that politicians have always been useless, Washington always a sour swamp of fecklessness and corruption. In countless particulars, that’s no doubt true. But the extent to which today’s US appears incapable of addressing its largest, most widespread concern — this is, while not quite unprecedented, most certainly not the same as it ever was.
Produced for the upcoming The Occupy Handbook, Paul Krugman and Robin Wells have written a pamphlet-sized brief on what they think is the best explanation for America’s current level of dysfunction. Their answer can be reduced to 2 words: inequality and polarization. My emphasis:
So how did we end up in this state? How did America become a nation that could not rise to the biggest economic challenge in three generations, a nation in which scorched-earth politics and politicized economics created policy paralysis?
We suggest it was the inequality that did it. Soaring inequality is at the root of our polarized politics, which made us unable to act together in the face of crisis. And because rising incomes at the top have also brought rising power to the wealthiest, our nation’s intellectual life has been warped, with too many economists co-opted into defending economic doctrines that were convenient for the wealthy despite being indefensible on logical and empirical grounds.…
The most likely explanation of the relationship between inequality and polarization is that the increased income and wealth of a small minority has, in effect, bought the allegiance of a major political party. Republicans are encouraged and empowered to take positions far to the right of where they were a generation ago, because the financial power of the beneficiaries of their positions both provides an electoral advantage in terms of campaign funding and provides a sort of safety net for individual politicians, who can count on being supported in various ways even if they lose an election.…
In sum, extreme income inequality led to extreme political polarization, and this greatly hampered the policy response to the crisis. Even if we had entered the crisis in a state of intellectual clarity — with major political players at least grasping the nature of the crisis and the real policy options — the intensity of political conflict would have made it hard to mount an effective response.
They’re going too easy on Democrats, who are and have always been fundamentally in favor of the status quo concerning capitalism and power; but the theory does not otherwise strike me as seriously in error. In its general thrust, it’s not dissimilar from Hacker and Pierson’s Winner Take All Politics. In both cases, the crucial role of politics is not downplayed or disregarded, but, at the same time, neither duo ignores how economic processes can establish a logic and equilibrium of their own. Inequality is self-perpetuating.