Synthesis: Politics and the English Language in the 21st Century

In the late 1970s, a 50-year trend toward more equal distribution of incomes in the United States was reversed. At first there was debate over the evidence, but by the 1990s economists of almost every stripe agreed that income disparity was rising. When President George W. Bush declared in early 2007 that “income inequality is real—it’s been rising for more than 25 years,” the matter seemed settled. But three big questions remained: Why were incomes becoming less equal? Was this disparity really a problem? And how come inequality of consumption wasn’t nearly as great as that of income? The last two questions now seem to have been answered. Americans below the very top income percentiles (where paychecks continued to grow) had borrowed to keep spending despite stagnant or declining incomes. For a time, rising asset prices—especially home prices—masked how leveraged households had become. But when home prices began to decline in 2006, the result was a global bust. In early accounts of the financial crisis, income inequality was not seen to play a major role. Now it’s beginning to get attention. When even a professor in the University of Chicago’s market-oriented finance department, Raghuram G. Rajan, fingers unequal incomes as a key factor behind the crash, you know something’s up. As Rajan tells it in Fault Lines (Princeton University Press, 2010), Washington politicians embraced more lending as the way to counteract the economic struggles of the middle class. “Let them eat credit” is his summation. We did not digest it well. Rajan paints the rise of inequality as the product of those with more education reaping increasingly bigger rewards—the dominant explanation for decades. But while it’s certainly not wrong, it may be incomplete. Clyde Prestowitz, Arianna Huffington, Robert B. Reich, Jacob S. Hacker, and Paul Pierson see political choices at work in the inequality boom. And political choices can be reversed. Prestowitz, a veteran Washington trade warrior, makes a thoughtful case in The Betrayal of American Prosperity (Free Press, 2010) for a government-led industrial policy aimed at creating and preserving middle-class jobs. Government already intervenes in the economy, he observes. “Our problem is that…it does so without having a sensible economic or industrial strategy to guide and control it.” Why don’t we have a sensible economic or industrial strategy? Because corporate lobbyists keep us from having one! That’s what the other four authors argue, and before you close your ears to this antibusiness propagandizing, be warned: There’s meat to it. Not that you’ll find much meat in Huffington’s Third World America (Broadway Business, 2010), a hasty clip job redeemed somewhat by infectious energy, the occasional bon mot, and the author’s habit of crediting all those from whom she clips. The prolific Reich, meanwhile, has delivered the busy person’s guide to inequality economics: Aftershock (forthcoming from Knopf this month) is a brisk, intelligent run-through that you can finish in two hours. Hacker and Pierson, though, are the ones who deliver the goods. In their dense but engrossing book Winner-Take-All Politics (forthcoming from Simon & Schuster this month), the two political scientists start by making the case that economic forces fail to explain why incomes have skyrocketed at the very top of the distribution (the highest 0.1%, and even 0.01%) while going nowhere for the bottom 90%. “Those at the top are often highly educated, yes,” they write, “but so, too, are those just below them who have been left increasingly behind.” They contend that government decisions encouraged this income explosion at the top. The crucial turning point, they say, came not in 1980, when Ronald Reagan was elected, but two years before. The business community, reeling after years of labor victories and regulatory encroachments, had begun to organize over the course of the 1970s and focus its energy on politics. The Chamber of Commerce tripled its budget. The Business Roundtable and the American Council for Capital Formation were born. The first two big legislative wins came in 1978, when the Democrat-controlled Congress killed off a proposal to create an office of consumer representation and a union-backed revision of labor laws. Where the conventional wisdom confidently declares, ‘It’s the economy,’ we find, again and again, ‘It’s the politics.’ —Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics After that there was no turning back: Business groups had figured out how to work the new levers of power in Washington, while the mass-membership organizations that had represented working America—not just labor unions but also the likes of the American Legion and the Elks—fell into sharp decline. More clout for business isn’t necessarily bad news, and Hacker and Pierson could have acknowledged that at least some of the tax cuts and other business-friendly policies adopted since the late 1970s made good economic sense. Their description of the organizational dynamics that have tilted economic policymaking in favor of the wealthy is nonetheless convincing. New liberal groups may have arisen, but they focus on the social concerns of the affluent. Government-employee unions, for their part, look out for government employees. And most private-sector unions focus on defending the interests of their shrinking memberships. No big organization has been looking out for the broader interests of the middle and working classes. The result of business’s lobbying triumph in Washington is, perversely, a situation that may not be good for business. When all economic gains go to those at the top, it’s hard to maintain the broad-based growth in demand that keeps an economy healthy. This isn’t just a challenge for the United States—growing inequality is becoming a big issue in China and India as well. That’s what makes Hacker and Pierson’s book so important. Hacker has already written one debate-defining tract, The Great Risk Shift (Oxford University Press, 2006), which described how individuals were getting stuck with health care and retirement risks long borne by institutions. Now he and Pierson are trying to shift the discussion of inequality from the economic realm to the political one, where it could conceivably be addressed by campaign-spending restrictions and structural political reforms. Don’t be too surprised if they succeed. For More Recommendations... For more recommendations from HBR contributors and editors, go to blogs.hbr.org/synthesis. Plus, as a matter of policy, we don’t review our own books, but we hope you will. Check out the “New Books from the Press” blog post each month.

Synthesis: Politics and the English Language in the 21st Century

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