A Cultural Indicator?

I love this graphic! I first showed it, going all the way back to 1929, on the old LaMarotte here. This time I’ve updated it to 2010 but show it from 1951, the year I arrived in the United States. Of course this is an economic chart, taken from that very sanctuary of money wisdom, the Bureau of Economic Analysis, keeper of the Gross Domestic Product’s holy value. Nonetheless, I view this figure as a cultural indicator although it shows disposable income per capita in constant, thus inflation-free dollars. When I arrived on these shores (in New Orleans), the figure was $9,352 per living human; at the midpoint of my stay here, in 1980, the figure had more than doubled to $18,863. And now it stands at $33,010, nearly again double the 1980 figure. Since I arrived here the measurable purchasing power per person has increased three-and-a-half-fold!

Why is this a cultural indicator rather than a kind of capitalist’s version of Amazing Grace? I don’t need to point it out to likely readers of this blog. The chart came back into my memory as I contemplated times in which stopping Social Security payments (yes, to little old me)—and payments to the politicians’ most venerated subgroup, veterans (that’s me too) is now being used as a threat to avoid the country officially falling into technical bankruptcy. Back in 1951 there was no talk like that, no “drama” in high places along these silly lines. Back then real income was less than a third what it is today. And we were then in the middle of fighting the Korean War (36,516 dead versus 6,026 dead in Iraq/Afghanistan as of June 5, 2011). World War II with staggering costs in money and lives (416,800 dead) was still a recent memory then. The feel of the times back then was so very different; indeed energy, confidence, and public courtesies were all quite high.

Is sharply climbing wealth, therefore, a reliable cultural indicator—so that its every increase signals a step down in culture? Wealth as a contrarian indicator? If that is true our economic troubles these days may signal hope for the future—albeit our leading circles have not as yet discovered that.

More Notes on the "Divide"

Several posts on Ghulf Genes deal with economics, always in a more or less cultural context; I tend to deal with the subject at a more technical/practical level on LaMarotte. Two entries in particular, one on wealth and one on disposable income have touched upon what I perceive as a gradually evolving divide in society. In both of these cases the mere presentation of the data consumed the space that I allocate per entry, a kind of limit I impose based on personal habits of reading things on a screen: too long and I get restless. But a consequence of that limitation is that I never get to the point that I am after, which is to ponder the underlying factors that produce the situation I spend so much time describing.

As I look back fifty years or so, it seems to me that the great divide began to open up at around the time when the Berlin Wall fell and the Cold War ended. Certainly from the time when I arrived here as an immigrant in 1951 until 1989 when the wall fell, the country underwent a kind of cultural winter. The spontaneous development, the natural life-cycle, of our civilization was suspended during that time—and resumed when the threat of the Communist menace retreated. Ample signs of relaxation began to appear in the early 1960s already, usually associated with youth and hippies. But at the more organized levels of society, the release of tensions awaited the Reagan years. And afterwards Western Civilization—more here than in Europe—resumed its natural vector. All right. This is a personal take. The official or ambient narrative is still that of Progress. Therefore whatever comes out of the future is by definition better, and the coming of the New World Order, the avalanche of technology, the waves of commercialization, the rights revolutions falling over themselves in a rush to ecstatic fulfillment—all this is viewed in positive ways. I try to view all this, including the dangerous cleft I see opening in the society, in a neutral way: before a higher civilization is rooted, the old one must pass away. Hence I ought to praise all signs of breakup. The sooner done, the sooner over. At the same time, I foresee that the future will be ugly; from a strictly rational point of view, I’d like to get there with as little damage to as many people as possible.

The core aspect of the divide, as I see it, is the disaffiliation of the major elements of the society, particularly of the haves and the have nots, a cultural-war in the making. The onset of this cleavage is clearly visible in the sharp drop in marginal tax rates applicable to the wealthy that took place during the Reagan administration. The rate fell by 30 percentage points in the 1981-1989 period. To see a quite revealing graphic showing fifty years of tax rates, I refer you to my post today on LaMarotte. In that post I also argue that high taxes benefit the whole population whereas low taxes benefit elites—another way to talk about the cultural cleavage.
One makes these observations because the picture that opens is fascinating. The practical aspects of such a blog, I fear, are nil. I’m engaged in contemplation rather than advocacy. The phenomena that I’m observing are beyond personal influence, as I think currently unfolding history will show. But what it is likely to show, in the longer reach, will be, I think, rather surprising. In the long haul the left will win, believe it or not. But not in the way in which, perhaps, we anticipate the outcome.

The parallel I now evoke is that of Rome—and that culture because it is the one most accessible to me. Rome’s “world wars” were a combination of the Punic Wars (Rome v. Carthage, Hannibal and Elephants, etc., 264-146 BC, in three separate waves) and the concurrent Macedonian Wars (the conquest of Greece, in four separate conflicts, 215-148 BC). In the wake of these vast and draining conflicts, Roman was left in sole possession of the world—at least as things then looked from Roma. But thanks to the enormous wealth that then began to flow from the possessions that Rome acquired, the same process of social division that I detect taking place here (under the slogans of Freedom, Markets, and Capitalism) began in Rome. The process featured a very powerful and wealthy ruling class and a population of ordinary people increasingly impoverished. Impoverished how? Imported slave labor displaced the ordinary farmer and craftsman. Within fifty-five years of the final defeat of Carthage began what is known as the Social War. The actual disturbances lasted only briefly (91-88 BC), but the processes that then began continued to be violent and eventually led to the fall of the republic. We would today label the two sides Right and Left: the propertied ownership class and the ordinary plebs. The leadership of both came from the aristocracy. Eventually the left, in the figure of Julius Caesar, won the field. Caesar? A lefty? Absolutely. We think of him as an emperor, but he came from a so-so neighborhood in Rome. You know. Small shops, modest houses, a brothel here and there. He was of noble background, poor, but he had lots of talent. And he was on the side of the people against the Establishment. Enantiodromia is one of my favorite Greek words: it means a process that transforms something into its very opposite. The Roman Empire was a left-wing enterprise that never again, after Augustus took power, let the wealthy oligarchs even touch, never mind hold, the reins of power.

The Richer the Poorer?

I’m accustomed to using the lens of statistics to enhance my understanding of cultural phenomena. Here is such a glimpse. Consider that in 1958 disposable personal income per capita was $9,433; in 2008, the corresponding number was $28,741. These numbers are comparable because both are expressed in constant dollars pegged to purchasing power of the dollar in the year 2000. These two numbers tell us that in 2008 we had three times more real wealth per person than we had in 1958. Dwight D. Eisenhower was president at the time; the Interstate Highway System was under construction, had been since 1956. The highest income tax rate in 1958 was 91 percent on income exceeding $400,000 ($3 million in 2008 dollars); the top rate in 2008 was 35 percent on income above $357,700. To the best of my knowledge, no state, county, or school district tottered on the brink of bankruptcy in 1958. And college education was free to all residents of the several States of the Union.

These thoughts surfaced because Brigitte happened across an article on commondreams.org by Ralph Nader titled “Purloining the People’s Property,” available here. The article’s gist is that the situation has drastically changed. Our legislators are privatizing public functions with a kind of desperation unworthy of those we appoint to govern us. But I need not seek examples in Arizona, Colorado, Pennsylvania, Indiana, or Illinois. I have examples right here at home; the de facto bankrupt Detroit School System comes to mind when I look around.

The value of the statistical underpinning is that it shows, beyond question, that the causes of our deterioration are not really financial. Nor can we blame it on war. In 1958 the end of World War II was thirteen years back. It had consumed $4.1 trillion in 2008 dollars. The Korean war was five years back; it had gobbled up $320 billion (same basis) and, in its peak year, it commanded 4.2 percent of Gross Domestic Product. Something else has changed. Unfortunately we have much less precise access—if any, for that matter—to the invisible structures that represent a collective of souls. If we could see that structure unambiguously—as with patient effort we can see the financial structure—we would know where the problem lies and why it persists.

Wealth and its Allocation

If those who keep our national accounts are doing a good job, specifically the Bureau of Economic Analysis, part of the Department of Commerce—the agency that constructs the Gross Domestic Product and its subcomponents—there is no doubt that wealth has increased. I looked at this subject the other day and confirmed it using data from the BEA dealing with per capita disposable personal income expressed in constant dollars.* To look at a reasonable time period, let's take twenty years. In 1988 disposable income per person was $20,740 in the United States. Twenty years later, in 2008, it was $28,741—in dollars of the same purchasing power. Actual purchasing power had therefore increased almost 40 percent in that period. Wealth has definitely grown. And if we go back forty years, real wealth has more than doubled; in 1968 disposable income was $12,892 for every woman, man, and baby in the realm.

But the quality of life does not necessarily mirror increase in real wealth—and that has all manner of interesting implications. The facts bombard us. In getting ready for a move we just discovered some old copies of the Detroit Free Press, Wall Street Journal, and the New York Times from the year 2000. Strange and wonderful: all three papers were physically larger. They were also thicker—because they held more ads. And the Detroit paper, which arrived at our door daily in those days, is now only tossed four times a week. Detroit may be an extreme example, Motown that it is, but it illustrates the subject. We drive its highways. Only those portions leading directly from the airport to the Ford Field football stadium are decently maintained. Why? Super Bowl XL took place here in early 2006. Bridges on many other thoroughfares are literally shedding concrete and bleeding rust. Three of the four domestic auto makers are in bankruptcy. A local malaise? Not really. There are many other signs, not least the well-known economic crisis in banking and housing. Then last Thursday the New York Times ran the article that actually triggered this post; it was headlined: COSTS KEEP RAIL SYSTEM OUTDATED ACROSS U.S. How come? Wealth is increasing; we do have the money.

Once you have wealth—and it is growing—it’s not the wealth that matters any more. It is its allocation. And here the issue boils down to two factors: who gets the money and what is it spent on. Considering the first question, wealth has been shifted to the top fifths of households over time. The following table shows this process over a forty-year period. It is derived from Census data available here.

Share of Aggregate Income by Household Quintiles - in Percent
	Lowest	2nd	3rd	4th	5th	Top 5%
1967	4.0	10.8	17.3	24.2	43.6	17.2
1987	3.8	9.6	16.1	24.3	46.2	18.2
2007	3.4	8.7	14.8	23.4	49.7	21.2

A picture illustrates the change much better. The following bar chart shows change in share for three periods: from 1967 to 1987, from 1987 to 2007, and then for the entire forty-year period. What this tells us is that the rich get richer and the poor get poorer. Hence the quality of life for most declines despite an increase in wealth. Please note here that the last block, the one labeled “Top 5%” is part of the fifth quintile of households. It merely shows that the very top was the greatest winner in this forty-year race to the top.


This shift of wealth from the lower 80 percent of households to the top 20 percent may, all by itself, explain why our rails (and other activities in the public domain) are no longer maintained. This kind of rather dramatic shift signals that “natural phenomena,” thus market forces—over against conscious policy—govern the fortunes of the population. I have little doubt that this outcome is in large part due to the great expense involved in getting elected. Where the money comes from for that is very important—as are the motives of those who provide it. Are those motives selfish or communal? The money must come from the top fifth, by and large: it has been getting very much richer. It’s motives appear to be selfish, else we would see more allocation of wealth to the commons: our transportation systems, including the public transit, environment and parks, education, health care, the infrastructure, and the genuinely needy. I don’t have any data, but I suspect that the salaries of our elected officials, of their staffs, and the costs of their incidental expenses are much less than what these same officials have to expend on getting elected. If that money comes from corporate wealth—and if he who pays the piper calls the tune—I rather doubt that we still have a genuinely functioning democracy.

But there is a deeper current here as well. Our thinking has become simplistic. The notion that free markets are the answer to everything is unworthy of our species. That concept is modeled on nature, an unconscious process. But we are a conscious phenomenon. We are intentional. We can do better than letting nature rage away, destroying values built up very slowly over long periods by conscious effort. Put metaphorically, it’s nature that produces IPods but it’s humanity that builds a highway system for common use. It’s much easier to persuade individuals to buy a discrete product producing instant pleasure than a vast network of rails extending hundreds of miles.

No, indeed, it’s not the wealth but its allocation that counts—and the allocation needs to have a much higher level of intentionality, and a much more extensive time horizon, than our current system, focused on the next quarter or the next election, “naturally” produces.
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*The BEA uses what are called “chained” dollars with a 2000 base, a newer form of calculating constant purchasing power, thus with the distorting effect of inflation (or deflation) removed.