The Antiplanner’s Library: Coming Apart

One of the subthemes of the Antiplanner’s latest book is that there is a growing divide between the middle class (meaning people with white-collar jobs and their families) and the working class (meaning people with blue-collar jobs and their families). Charles Murray‘s latest book, Coming Apart, explores this split in more detail. He bravely proposes a cause of that split and suggests a possible solution.

Part of this book is the next book the Antiplanner wanted to write. Murray provides a great statistical review of growing income inequality leading to frightening conclusion that the United States is turning into a two-class society, one an upper-class elite and the other lower-class drudges who lack economic security or well-being. However, Murray’s explanation of this decline, and his remedy, are both far less persuasive.

According to Murray, the United States was founded on four “virtues”: “industriousness, honesty, marriage, and religiosity” (p. 127). He documents the decline of these virtues since 1960 and argues that this decline is the cause of the split. Moreover, he argues that “nonjudgmentalism”–that is, the elite’s tolerance of the decline of those virtues and its unwillingness to criticize anyone for doing such things as having children out of wedlock, failing to earn a living, or even going to jail–is what has allowed the decline to take place (p. 289).

“A social democrat may see in [these trends] a compelling case for the redistribution of wealth,” says Murray, while “a social conservative may see a compelling case for government policies that support marriage, religion, and traditional values” (p. 234). As a libertarian, he doesn’t think government can promote these values but he does think government can help destroy them, so his remedy is “limited government” combined with a hope that, if government gets out of the way, the country will experience a “great awakening” in which people suddenly realize that they need to go back to work and apply social pressure on others to do the same.

Not surprisingly, many people find this unconvincing–and the Antiplanner is among them. Murray is relying on a correlation equals causation argument: certain things such as marriage declined at the same time as income equality, so he presumes that the first caused the second.

Like many other observers, Murray has tried to explain the decline in income equality since it peaked in the late 1960s. (The Gini coefficient, a standard measure of income inequality, bottomed out in 1968; Murray puts the turning point at 1964; but others say the early 1970s. I’ll just use 1970 here.)

What Murray misses is that any explanation for the decline must also address why income equality grew before 1970, as it was much lower in 1910 than in 1970, and quite possibly lower in 1910 than it is today. If we apply Murray’s theory, then industriousness, honesty, marriage, and religiosity must have grown between 1910 and 1970. While I haven’t looked at any data yet, I am going to go out on a limb and guess that they probably did not.

So the real question that must be asked is not just what caused the decline since 1970 but what caused the growth in income equality from, say, 1940 to 1970 and a decline afterwards. Offhand, I can think of two major things that aren’t a part of Murray’s “founding virtues.”

First, homeownership rapidly rose from 1940 (when it was about 43 percent) to 1970 (when it was about 63 percent, or just a couple of percentage points shy of today). Since then, homeownership in some states (including Oregon and California) has declined, and the affordability of homeownership–and therefore its net value to homeowners–has declined in many more states.

Second, the cost of college educations fell to nearly nothing after World War II, as the government offered virtually free educations to returning veterans and states continued to offer very low-cost educations to students for several decades after that. My four years of undergraduate education cost my parents about $3,000, including all four years of tuition and books and at least two years of room and board. That’s about $16,000 in today’s dollars, which–considering the course load I was taking–is about one year’s worth of today’s tuition alone at the university I attended.

There may be other factors that contributed to a reduction of income inequality before 1970 and an increase after that year, and I hope some of my readers will suggest them. But my main point is that it is very likely that the problem is institutional, not a decline in morals, because only institutional explanations are likely to account for both the decline and increase.

Share

17 thoughts on “The Antiplanner’s Library: Coming Apart

  1. paul

    Another reason for middle class decline cited by Hedrick Smith in “Who Stole the American Dream” is the dramatic rise in corporate lobbying after the Lewis Powell private memorandum of 1971. According to Smith, Powell was appalled at the creation of the EPA and Nixon’s increased taxes on businesses. Powell’s memo said in part “Business must learn the lesson…that political power is necessary.. that such power must be used aggressively and with determination–without embarrassment and without the reluctance which has been so characteristic of American business… There should not be the slightest hesitation to press vigorously in all political arenas…”

    Smith claims that from 1971 to 181 business went from having 175 to 2,445 offices in the capital and massively increased their lobbying effort. The National Association of Manufacturers moved to Washington and the US Chamber of Commerce massively increased its presence. Smith claims the 1978 congress marked the shift in favor of pro-business policies that blocked Carter’s pro middle class reforms.

    Although not specifically stated by Smith I would postulate that this area also marked the decline of union power and the subsequent decline in real wages as the rewards from productivity increases went to top management and share holders. There are now well organized firms that consult on how to weaken or eliminate unions, Google “union avoidance consultants” for examples.
    These appear to have been very effective at eliminating or removing unions with subsequent declines in real wages and pensions. It is hard to imagine the Walton’s being one of the richest families in the world if they did not pay low wages, offer low benefits and work aggressively to keep unions out of that work force at Walmart. Ironically they also make money by providing low priced goods to the lower class they are helping to create. According to Smith, Walmart actually started to require firms to relocate to China in order to lower costs without any concern whatsoever for the American workers displaced and the decline of American manufacturing.

    Germany seems to have had a much better economic model preserving their manufacturing base, maintaining their middle class and paying better wages while having a well trained and skilled workforce. It is telling that German firms have union representatives who sit on the board of directors and who presumably have both their members interests in both maintaining wages and benefits but also an interest in keeping the firm competitive by not resisting new developments and automation.

  2. paul

    Another reason for middle class decline cited by Hedrick Smith in “Who Stole the American Dream” is the dramatic rise in corporate lobbying after the Lewis Powell private memorandum of 1971. According to Smith, Powell was appalled at the creation of the EPA and Nixon’s increased taxes on businesses. Powell’s memo said in part “Business must learn the lesson…that political power is necessary.. that such power must be used aggressively and with determination–without embarrassment and without the reluctance which has been so characteristic of American business… There should not be the slightest hesitation to press vigorously in all political arenas…”

    Smith claims that from 1971 to 181 business went from having 175 to 2,445 offices in the capital and massively increased their lobbying effort. The National Association of Manufacturers moved to Washington and the US Chamber of Commerce massively increased its presence. Smith claims the 1978 congress marked the shift in favor of pro-business policies that blocked Carter’s pro middle class reforms.

    Although not specifically stated by Smith I would postulate that this area also marked the decline of union power and the subsequent decline in real wages as the rewards from productivity increases went to top management and share holders. There are now well organized firms that consult on how to weaken or eliminate unions, Google “union avoidance consultants” for examples.
    These appear to have been very effective at eliminating or removing unions with subsequent declines in real wages and pensions. It is hard to imagine the Walton’s being one of the richest families in the world if they did not pay low wages, offer low benefits and work aggressively to keep unions out of that work force at Walmart. Ironically they also make money by providing low priced goods to the lower class they are helping to create. According to Smith, Walmart actually started to require firms to relocate to China in order to lower costs without any concern whatsoever for the American workers displaced and the decline of American manufacturing.

    Germany seems to have had a much better economic model preserving their manufacturing base, maintaining their middle class and paying better wages while having a well trained and skilled workforce. It is telling that German firms have union representatives who sit on the board of directors and who presumably have both their members interests in both maintaining wages and benefits but also an interest in keeping the firm competitive by not resisting new developments and automation.

  3. Matt Young

    Set the speed limit for buses in LA at 140 MPH. The result will be that working class stiffs, who take the bus, will have their job search and commute opportunities expanded by 10 fold over the geography, while rich fools sit in their cars on congested freeways. The economy of LA will expand by 30%, with most of the benefits going to bus riders.

    How does one set the speed limit for buses at 140 MPH? Use portable concrete curbs and take over the HOV lanes.

    C. P. Zilliacus Reply:

    While I presume that 140 MPH indicates that your comment was partly tongue-in-cheek, there is still a fair amount of merit in your idea.

    If those lanes for the buses allow paying automobile traffic (that can keep up with the buses), all the better.

    Otherwise, converting HOV lanes to tolled lanes allowing buses and other paying traffic, no problem.

    Matt Young Reply:

    No, not tounge in cheek. Just repeating the cure from the 1930s depression, make the transportation sector adjust to the new mass markets. Back then the cure? Tear out the rail and rely on rubber tire and steering wheel. The cure this time? Tear out the rail and rely on the microprocessor and rubber wheel. The thing about high speed bus rapid transit is that a conductor is on board, even though they are robot driven. So, the issue of being driverless does not arise, and they are being deployed. Seimens BRT product can move at speeds up to 70-80 MPH today, and easily over 100 MPH in a year or so; using lane guide technology.

    metrosucks Reply:

    As Randal says, automated cars and buses are the future.

    the highwayman Reply:

    Here is an easy low cost way of automatically guiding rubber tire vehicles.

    https://www.youtube.com/watch?v=6I1GBcAlm-8

  4. irandom

    Paul,
    I agree with you stuff like Big Pharma lobbying for Obamacare is a bad thing. Generally established businesses can better absorb costs like Walmart favoring an increased minimum wage, while mom and pops struggle. Who is lobbying for the market? I draw the line at unions though, I want my freedom to walk through a picket line to get to work, not attend more useless meetings and to not have my dues used to keep incompetent employees employed. I want a 401k that I own, not an underfunded pension. I don’t want someone rewarding the laziest workers through a collective bargaining or dumb lawsuits like Lilly Ledbetter. I am bright enough to look at the paper or online to see if I can earn more, even when when I made minimum wage.

    paul Reply:

    Irandom,

    1) 401k’s have been a disaster for the baby boomer generation in that the median 401k for a person in their early 50′s is about 1 years salary. To retire at 65 will require 8-12 years salary, preferably the latter 12 times salary. So few 401k’s on on track to achieve this that most people without defined benefit pension will work well into their 70′s often until they are unable to work any longer. In addition 401k’s are usually badly managed with owners being cheated by having to pay high fees. If you reply to this email, please state what fees you are paying on your 401k. If you don’t know you are probably being cheated by the financial services industry. The cost of a 401k is also much higher for the same benefit because as the owner approaches retirement age they have to shift their 401k assets to safer securities that don’t pay as high an interest rate as a pooled defined benefit pension is able to. The only advantage, which can be quite a big advantage I admit, to a 401k is mobility. What we need in the US is a mobile defined benefit pension that is well run by competent trustees and guarantees a pension for life after retirement at 65. This will be cheaper than a 401k and allow people to enjoy the fruits of their hard work, in many cases improving productivity dramatically over their lifetime. Note that the reason many public pensions are in trouble is because of incompetent management. This is why in the UK now it is required that pension trustees must have training in their responsibilities before they can serve, search Google key words “uk pension trustee responsibilities.” See also “when I’m 64″ by
    Teresa Ghilarducci.

    2) The only reason I know all this is that, against my will initially, I was represented by a union in my current job. Management decided to take us to a 401k and the union pointed out all the advantages above and the huge loss employees would face if their pensions were converted to 401k’s. Refer to “Retirement Heist” by Ellen E. Schultz about how this was done at IBM, and employees in their early 50′s suddenly realized they had been cheated of hundreds of thousands of dollars. This at a time the top management was increasing their own pay dramatically by appointing the boards that approved their own pay. It was our union that has a research staff that was able to calculated the losses, etc.

    3)I in the windowless room I worked in we could not hear the broken fire alarm for years, so that only when someone went out of the room did we realize it was on and leave. Nothing we, or the building manager, or our immediate supervisors ever resulted in the alarm being fixed. Finally in exasperation, and I was a Republican at the time, I ask the building manager “what if I threaten to file a union grievance over this”. His faced beamed and he said, “that will get it fixed”. It was, within ten days.

    So, yes, I agree with many of the things you say about unions. But there are also benefits. One was that in the 1945-1980 period many more employees were unionized and able to increase their wages as productivity went up. That link now seems to be broken.

    Also, if unions are so bad, why is Germany doing so well when they are heavily unionized?

    tex Reply:

    Germany’s current well being, sometimes called the German Miracle, is the result of the government’s reduction of labor costs over the past 10 years. Prior to 2002 Germany was in stagnation with high unemployment, and with union agreement Germany traded reducing unemployment and greater growth & overall prosperity for relaxed labor regs and reduced pay and benefits. The changes started in 2002 with more reductions in overall labor costs over the following years. Pay rates were reduced, the length of time workers could claim unemployment were reduced, union factories were allowed to subcontract work to outside, non-union companies who paid lower wages and could hire and fire at will (Audi, for one does this) and other such things. The German unions accepted that they had become uncompetitive and agreed to such changes. Now, in some German cities there is a labor shortage.

    Basically, I’m all for unions so long as they don’t have an uncontested monopoly. In Germany’s case, German manufacturing prowess was being contested by Asian companies, and Germany made the necessary corrections. For GM, the non-union Asian auto-makers in the south contested the union supremacy, and even though the GM union allowed reduced pay for new workers, the older guys and the work rules (huge manual of rules) is not sustainable and they will eventually fail, or if they have enough political power the Feds will take them over and just become a tax sink hole – we’ll never recover the bailout.

  5. tex

    This income inequality is based upon HOUSEHOLD income, and most of it can be explained by the changes in the makeup of households.

    Prior to WWII most people were married and women did not work though the number of women working outside of the home may have been increasing slowly (I haven’t the data) for lower and middle working families. WWII put many women to work and technology reduced the home work load (better washers/dryers, toasters, vacuum cleaners, food mixes, etc, etc, a revolution than continues to this day). Thus, after WWII, with more wealth, 2 cars, less home work required, more and more women went to work, and around the 60s more and more went to college setting the stage for higher earnings in the 70s and beyond.

    So, women have been increasing their contribution to the household for years and those college educated women postponing marriage and gaining high paying professional jobs are marrying highly paid professional men – in fact, that is where they meet, at work. Previously, professional men married young women who stayed home. Actually, at the very top of earners, wives are still more likely to stay at home, but the numbers are diminishing.

    Consider the low end, now mostly single women. The government has driven the men (formerly husbands) out of the households by offering cash & benefits. It is most common that the poorest lose money by going to work. The son of a middle class friend who lives with his child and girlfriend will not marry because of the net economic loss, and he knows exactly what it is.

    As you move up the household income levels, you find higher rates of marriages and longer term marriages. During the time before the government started driving men out of the households, income for low to middle incomes households were derived from 2 income earners compared to the upper middle to upper income household incomes derived from a single male earner. Now you have single unskilled person households at the bottom compared to households at the top of 2 highly paid professional.

  6. C. P. Zilliacus

    The Antiplanner wrote:

    There may be other factors that contributed to a reduction of income inequality before 1970 and an increase after that year, and I hope some of my readers will suggest them. But my main point is that it is very likely that the problem is institutional, not a decline in morals, because only institutional explanations are likely to account for both the decline and increase.

    The rise of NIMBYism masquerading as environmentalism starting in the late 1960′s when it came to highway construction deserves some share of the blame, for it has caused the nation to waste significant amounts of time and money stuck on congested highways.

    Another contribution from Richard Milhous Nixon that hurts the nation to this day is so-called War on Drugs. It has watered-down our civil liberties, forced increases in law enforcement budgets (“regular” state and local police for narcotics enforcement; federal law enforcement (DEA, Customs Enforcement and Border Patrol); and jails and prisons. Now I admit that Nixon did not sign laws outlawing marihuana, cocaine, heroin and other substances, but he did start that “war.”

    The USEPA was created during the Nixon Administration, and to the extent it has implemented real environmental protection (Clean Water Act, Clean Air Act (including reformulated fuels (including unleaded gasoline) and improved vehicle emission controls)), it has been a benefit to he nation. But social engineering schemes (such as Smart Growth, which rewarded owners of single-family detached homes who were in their homes when land use restrictions were imposed while hurting future purchasers of homes) have not contributed to the wealth of the middle class of the United States.

    Cutbacks in public post-secondary education by state governments (apparently frequently to build and operate prisons) has done the middle class (except corrections officers).

  7. Sandy Teal

    I think the Antiplanner has been spending too much time reading planner literature and that has started to infect his thinking. The “middle class”, “white collar”, “blue collar” and other such labels are outdated remnants of simplistic analysis in years gone by.

    Look around. The planners oversimplify people so that they can argue that they know what all those categorized people really want. Meanwhile all the real people reveal their preferences a hundred times a day in the free market, all without a professional planner to tell them what they should want.

  8. C. P. Zilliacus

    Meanwhile all the real people reveal their preferences a hundred times a day in the free market, all without a professional planner to tell them what they should want.

    Sandy Teal, the above is spot-on correct. At least honest planners and engineers use observed behavior and not so-called stated preference surveys in planning processes.

    I believe much of the data that went in to the forecasts that justified high-speed intercity rail in California were based on stated preference data.

  9. bennett

    Typical. Get government out of the way and poof… great awakening… everything will be okey dokey. A little libertarian magic dust will do the trick. I’m getting tired of spinning my wheels so I’ll end my comment here.

    metrosucks Reply:

    Bennett, why do you take it so personally?

    The government should be there to protect individual rights and provide a certain level of service that arguably can’t be replicated by the private sector. Its job is not to take over the economy and pick & choose winners.

    bennett Reply:

    Nothing personal at all. “Protecting individual rights” is a massive grey area. Sure, market regulation can sometimes result onerous bureaucracy. However, market deregulation can sometimes lead to crisis. If you look at government intervention in black and white terms there is only one thing you can be sure of… you are wrong.

    The “great awakening” thing is rich though.

Leave a Reply