Great Divergence: primary themes and main arguments by Timothy Noah
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The most striking change in American society in the past generation roughly since Ronald Reagan was elected President has been the increase in the inequality of income and wealth. Timothy Noah’s “The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It”, a good general guide to the subject, tells us that in 1979 members of the much discussed “one per cent” got nine per cent of all personal income. Now they get a quarter of it. The gains have increased the farther up you go. The top tenth of one per cent get about ten per cent of income, and the top hundredth of one per cent about five per cent. While the Great Recession was felt most severely by those at the bottom, the recovery has hardly benefitted them. In 2010, ninety-three per cent of the year’s gains went to the top one per cent.
Since rich people are poorer in votes than they are in dollars, you’d think that, in an election year, the ninety-nine per cent would look to politics to get back some of what they’ve lost, and that inequality would be a big issue. So far, it hasn’t been. Occupy Wall Street and its companion movements briefly spurred President Obama to become more populist in his rhetoric, but there’s no sign that Occupy is going to turn into the kind of political force that the Tea Party movement has been. There was a period during the Republican primary campaign when Romney rivals like Newt Gingrich tried to take votes from the front-runner by bashing Wall Street and private equity, but that didn’t last long, either. Politics does feel sour and contentious in ways that seem to flow from the country’s economic distress. Yet much of the ambient discontent is directed toward government the government that kept the recession from turning into a depression. Why isn’t politics about what you’d expect it to be about?
Traditionally, class figured less in politics in America than in most other Western countries, supposedly because the United States, though more economically unequal, and rougher in tone, was more socially equal, more diverse, more democratic, and better at giving ordinary people the opportunity to rise. That’s what Alexis de Tocqueville found in the eighteen-thirties, and the argument has had staying power. It has also been wearing thin. During the five decades from 1930 to 1980, economic inequality decreased significantly, without imperiling “American exceptionalism.” So it’s especially hard to put a good face on the way inequality has soared in the decades since. Even if you think that all a good society requires is according to the debatable conservative mantra equal opportunity for every citizen, you ought to be a little shaken right now. Opportunity is increasingly tied to education, and educational performance is tied to income and wealth, when it comes to social mobility between generations, the United States ranks near the bottom of developed nations.
Noah writes from what might be called a neo-progressive standpoint. Like the original progressives, he seeks to blend an emotional and moral commitment to the causes of the left with the intellectual rigor of the best available economic and social science research. As in the case of the original progressives, the result is a powerful, if sometimes flawed, perspective that is likely to influence the course of American debates on issues of economic policy and justice. Noah’s central contention is that government policy can and should do more to reverse the trend toward greater income inequality that has developed in the United States since 1979. Some of his policy prescriptions, such as substituting carbon taxes and value-added taxes for the deeply regressive payroll tax, could win bipartisan support; others would have to await much larger Democratic majorities than currently exist in Congress. Still, although the analysis in this relatively short and very accessible book is necessarily incomplete, and some of its contentions are more powerfully stated than convincingly argued, The Great Divergence is an excellent guide to the emerging center-left economic policy consensus likely to inform Democratic Party thinking and policymaking for some time to come.
In “The Great Divergence,” the journalist Timothy Noah gives us as fair and comprehensive a summary as we are likely to get of what economists have learned about our growing inequality. Noah is concerned about why inequality has widened so markedly over the last three to four decades, what it means for American society and what the country can and, he argues, urgently should do about it. As he makes clear, what has mostly grown is the gap between those at the top and those in the middle. The principal influences on inequality that Noah examines include the failure of America’s schools to keep pace with the step-up in skills that advancing technology demands from our labor force; America’s skewed immigration policy, which inadvertently brings in more unskilled than skilled immigrants and thereby subjects already lower-income workers to greater competition for jobs; rising competition with China, India and other low-wage countries, as changing technology enables Americans to buy ever more goods and even services produced overseas; the failure of the federally mandated minimum wage to keep up with inflation; the decline of labor unions, especially among employees of private-sector firms; and what he sees as an anti-worker and anti-poor attitude among American politicians in general and Republicans in particular. Along the way, he enlivens what might otherwise be a dry recounting of research findings with fast-paced historical vignettes featuring colorful characters like the novelist Horatio Alger, the labor leader Walter Reuther and the business lobbyist Bryce Harlow.
What’s to blame, then, for America’s widening inequality? Leaving aside the politicians, Noah reviews economic research supporting the familiar hypotheses. Indeed, each of them is probably part of the explanation. But the goal of research in a policy-oriented inquiry like this one is quantitative establishing just how much of the explanation to assign to separate influences one by one, even if all of them contribute to the story. We want not merely to portion out the blame but to know what to do, and different explanations call for different remedies. It would make little sense, for example, to invest huge sums in reforming K-12 education and reducing the cost of college if the mismatch between graduates’ skills and what the economy requires accounts for only a small part of the problem. By contrast, if my Harvard colleagues Claudia Goldin and Lawrence Katz are right that education is the core of the issue (Noah draws extensively on their recent research, especially their aptly titled book “The Race Between Education and Technology”), then what and how we teach young Americans should be at the top of the agenda.
It is not Noah’s fault that economic research has yet to reach consensus on how much of the blame for inequality to place on which explanation, and it is to his credit that he does not try to portray a consensus that is not there. His summary of what we know from the relevant research is faithful to what the researchers have found. Part of the problem here, which “The Great Divergence” also accurately conveys, is the tension inherent in concentrating on the American facet of a worldwide phenomenon. As Noah makes clear, inequality is increasing almost everywhere in the industrialized and postindustrial world, even if the increase has been much greater in the United States. We need to know how much weight to give to America-centric explanations like the shortcomings of our schools or our immigration system or the demise of unions. But to understand a global trend, we would like a more universal explanation.
Noah’s own explanation is, in effect, “all of the above,” and his policy recommendation is therefore to take action on all fronts. His chief concern is the fear that ever widening inequality will undermine our democracy: “Americans believe fervently in the value of social equality, and social equality is at risk when incomes become too dramatically unequal growing income inequality makes it especially difficult to maintain any spirit of e pluribus unum.” He rightly emphasizes that while the potential for individuals to move up is essential to what makes inequality acceptable, at least to most Americans, economic mobility in the United States is now more limited than it appears to have been in earlier times and contrary to the popular image more limited than in many other countries. (It also matters that in America today incomes are becoming more unequal at the same time that most families’ incomes have been stagnant for more than a decade after allowing for inflation a point that Noah notes but does not emphasize.)
How much inequality can the Republic stand before the social and political fabric frays? Noah does not answer the question, in part because he doesn’t know, but mostly because he feels he doesn’t need to. “You’d have to be blind,” he writes, “not to see that we are headed in the wrong direction, and we’ve been heading that way for too long. The worst thing we could do to the Great Divergence is get used to it.” What economics terms “the Great Divergence” has until now been treated as little more than a talking point, a club to be wielded in ideological battles. But it may be the most important change in this country during our lifetimes-a sharp, fundamental shift in the character of American society, and not at all for the better.
The income gap has been blamed on everything from computers to immigration, but its causes and consequences call for a patient, non-partisan exploration. In The Great Divergence, Timothy Noah delivers this urgently needed inquiry, ignoring political rhetoric and drawing on the best work of contemporary researchers to peer beyond conventional wisdom. Noah explains not only how the Great Divergence has come about, but why it threatens American democracy-and most important, how we can begin to reverse it.
Fortunately, however, we might comfort ourselves by knowing that the United States remains a land rich in opportunity much as it was in the past, unique among nations in its lack of a rigid class structure and its social mobility. But we’d be deceiving ourselves. In The Great Divergence, Timothy Noah of The New Republic posits that, since 1979, there has been a “particularly extreme” divergence in income inequality in the United States. Noah synthesizes the work of economists, political scientists, and sociologists to argue that income inequality has increased, and that this is not good for American society. In the book’s final chapter, he advocates specific actions and policies that he believes would help reverse this trend. His suggestions are largely politically progressive proposals, including increasing taxes on the super-rich, bolstering the federal workforce, and breaking up the too-large-to-fail banks. While there are likely some conservative-libertarian policy wonks that would be amenable to his proposal to break up the large banks, few would likely support Noah’s proposal to revive organized labor.
The author takes the title of the work comes from a phrase used by Paul Krugman, an outspoken advocate for Keynesian stimulus, in his 2007 book, The Conscience of a Liberal. Noah defines the Great Divergence as a socio-economic phenomenon as one not primarily involving the poor. Rather, it “is about the difference between how people lived during the half century preceding 1979 and how they lived during the three decades after 1979.” The story he tells, however, is not just about income inequality; it is about diminishing access to the top. According to Noah, over the past several decades, opportunities for upward social mobility have not increased.
Unlike some pundits who rehash talking points, Noah commendably cites ample scholarship to support his claim. In The Great Divergence, the reader learns that the United States now offers its citizens less intergenerational economic mobility than northern and western European nations. (I would venture, however, that the United States still allows for greater social mobility for children of first-generation immigrants than do Scandinavian and other western European countries.) Noah also highlights an intriguing sociological finding which indicates that Americans tend to overestimate the degree to which American society fosters upward socio-economic mobility.
Notable within the pages of The Great Divergence then is the fact that Noah challenges Paul Ryan for an October 2011 speech in which the Wisconsin Congressman contrasted what he perceived to be American social mobility with a rigid European welfare state class structure. Ryan, according to Noah, “had it exactly backward.” In truth, European countries now offer more social mobility than the United States. While Noah penned his study of income inequality prior to Mitt Romney’s choosing Ryan as his running mate, The Great Divergence takes on a more salient political implication in this new found context.
So what caused the Great Divergence? According to Noah, the Great Divergence did not result from prejudice against African-Americans or women. The failure of the American educational system to meet the demand for higher skilled workers is part of the story, as is trade with low-wage nations such as China and the increase of business lobbying in Washington. The decline of organized labor also played a role. Noah also refers to the rise of extremely wealthy (“stinking rich,” in his parlance) as a “separate and distinct phenomenon” that can be thought of as “the Great Divergence, Part 2.” The last several decades have been witness to the emergence of what are, in essence, new social classes within the top 1%, namely the top 0.1% and the top 0.01%. Wall Street, according to Noah, played a substantial role in the emergence of these extremely wealthy individuals. Top income shares are rising faster in the United States than in other developed countries.
Overall, Noah may succeed in persuading the reader in that income inequality not only is on the rise and that it is problematic for society. He is less convincing in his policy proposals to remedy the situation. To be fair, he does rightly acknowledge that many of his proposals, many of which are further to the left than President Obama, are not “politically salable today.” Noah could have bolstered his work, and perhaps the reception to it, had he offered a list of concrete and specific policies that would both reverse income inequality and be palatable to a large slice of the American electorate. The work also suffers from the fact that it is largely a summary of other scholars’ work, much of it very technical; making it less accessible to a general audience that it deserves to be.
In conclusion, one can think of The Great Divergence as a plea to the American public to recognize that income inequality is a problem. It is also to acknowledge that social mobility is no longer operating the way in which it used to. I would contend that the frustration that many Americans feel with Washington in many ways reflects the fact that the system is not producing the same results as it did for people’s parents and grandparents. Income inequality currently is a topic of concern among the country’s economists, political activists, and pundits. Whether it will be a broadly discussed national concern remains to be seen. It would be heartening to see at least one moderator in the upcoming presidential debates ask each of the candidates where they stood on the topic of income inequality.
Noah, Timothy. The great divergence: America’s growing inequality crisis and what we can do about it. New York, NY: Bloomsbury, 2012. Print.
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