Certain kinds of inequality threaten democracy : Nobel laureate
As a British-American economist and academic, Angus S. Deaton has put his observation of US society into his book An Immigrant Economist Explores the Land of Inequality, in which the Nobel Prize-winning economist offers a scathing critique of US politics and economic policy. Deaton talks about inequality in the US and the changes in US society over the past few decades.
Deaton in an interview talks about China. He first visited China in 1984. His Princeton colleague Professor Gregory Chow was then arranging a regular summer course in economics at the Renmin University of China in Beijing. The course was a version of the standard US graduate core course in macroeconomics, microeconomics and econometrics. It was a very compressed course, giving something like a whole course in just one or two weeks. The students were wonderful, very engaged and very attentive.
He could not return to China for more than 30 years, being engaged with his work. He did a lot of work in India, and some in South Africa, but not in China. After he won the Nobel Prize in 2015, he travelled again to Beijing, Shanghai, Guangzhou, Zhuhai and Hangzhou. There he found quite a change in the 30 years in between.
In his book he has written that US society today is darker than it was in 1983, the year he immigrated to the US. The US then like much of Europe, had enjoyed 30 years of growth and shared prosperity after the end of World War II up until the early 1970s. In 1983, there was still the supposition that those trends could and would be resumed. But the 1980s, and even a few years earlier, were when the sharing stopped, and when better-off and better-educated Americans started pulling away from the rest. In hindsight, the Reagan administration was the beginning of that, as was the Thatcher government in Britain. Many writers refer to this as the beginning of neoliberalism, of a turn toward markets, and a diminution of collectivism. One key marker was Reagan’s firing of the striking air traffic controllers in August 1981, which marked the beginning of a war on unions, whose influence has much diminished since then.
One of the topics Deaton book focuses on is inequality in the US.
As per Deaton there is a tendency for economists to focus on income inequality, or perhaps consumption or wealth inequality. All of these are important, but there are other kinds of inequalities, for example, based on gender and race. Gaps in health outcomes are also very important and very troubling. What has worried Deaton most in recent years is the widening democratic gulf between those who do and those who do not have a four-year college degree. There are also widening health gaps between the same two groups, including in life expectancy. The government is almost entirely in the hands of the former, while the influence of the latter in politics and governance is much diminished. Those are also the people who face the consequences of deindustrialization and automation, as well as the decline of manufacturing relative to services. Yet, they are ruled by an educated elite with little knowledge of or sympathy for their concerns.
70 percent of economics PhDs in the US are not Americans and the influx of immigrants has “completely changed economics.”. Deaton thinks that immigration has changed economics for the better. However, it has further moved economics in America away from the concerns of most Americans. When so many people come to the US as graduate students, including many from India and also China, Latin America, and Europe, and even Africa, they bring with them some of their culture, some of the concerns of people where they grow up, and those cultures and concerns are different from those who were born and grew up in the US. This diversity has greatly enriched economics and expanded the kinds of issues on which economists work. The downside is a downside not just for economics, but for elite American universities overall. They absorb a great deal of tax-payers money but can no longer be regarded, at least at the graduate level, as largely American universities. I think this puts them in danger, especially from populists.
In addition to the study of inequality in the US, the book discusses the ongoing tension between economics and politics. As per Deaton economists have not always paid enough attention to politics, or to the legitimacy of views of people who think differently from them. Economics has become very technocratic, worrying mostly about improving the efficiency of the economic system. Politicians and voters have other concerns, and they are often correct. Referring to the technocratic solution, you often hear economists say something like “We know what to do, but politics makes it impossible.” And you hear politicians say, “I know what to do, but not how to be re-elected after I do it.” Economists should be ashamed to endorse such views. We live in a democracy, not a technocracy.
Deaton also says that inequality is necessary in almost all societies, except perhaps early hunter-gatherer groups. There is inequality even in Communist China, according to some accounts, as much or more than in the US. People differ from one another, which is a kind of inequality, and people need incentives to work and get educated so that those who respond more will do better than those who do not. If you guarantee equality to everyone, why would anyone work or innovate? Inequality, in and of itself, is not incompatible with a good society, nor even with a well-functioning democracy. But some kinds of inequality threaten democracy, and threaten America, but it is not a simple matter of income or even wealth. Democracies, in order to survive, require some kind of social contract that maps the obligations that people have to one another, and that such contracts must indeed pay attention not only to income and wealth inequality, but to many other things too, like who serves in the military, how the law works, how social insurance works, what kind of poverty is permitted, and that guarantees access to the political system for everyone.
