Economic inequality has been much in the press lately. For example, Timothy Noah wrote a ten-part series for Slate trying to explain the growth in inequality. Greatly to Noah`s credit, he dared consider the role of immigration in his Part 3: Did Immigration Create the Great Divergence? (albeit inadequately, as Ed Rubenstein has pointed out).
But, generally, the discussion about inequality has been missing half of the puzzle.
On the one hand, it`s safe to say that over recent decades, the very rich have gotten very much richer.
The farther up the pyramid you are, the faster the growth has been. The rise in income has been slower for the top ten percent than for the top one percent, and the top one percent has lagged behind the top 0.1 percent.
And when the statistical equivalent of an electron microscope comes along, we`ll probably see that the top 0.1 percent have had good cause to rue how slowly their wealth has mounted compared to the skyrocketing fortunes of the top 0.01 percent.
On the other hand, for most American and above all the poor, incomes have stagnated in inflation-adjusted terms—and for significant numbers, actually fallen. The influx of poor, unskilled immigrants from abroad has certainly swelled the number of people at the bottom of society and exacerbated competition for jobs and housing among them.
Additionally, it`s notable that the rich have learned how to use the poor as symbols to rationalize whatever they want to get away with.
An example well-worth savoring: the 2003 Harvard lecture, The American Dream of Homeownership, by Angelo Mozilo, CEO of Countrywide Financial, announcing that he would lend $600 billion to minority and lower income borrowers, in return for which he wanted mortgage regulators to lift those racially discriminatory demands for down payments and documents—thus helping precipitate the Minority Mortgage Meltdown.
Most public discussions of inequality have been of limited utility because the fundamental measure is not income or wealth, but long-term standard of living. And that has two halves: how much you have to spend and how much whatever you spend it on costs.
Few commentators have thought systematically about the second half of the equation—the cost of living—even though we all obsess over it in our own lives.
For instance, wages for high school dropouts are similar in California, which has the highest percentage of immigrants, to wages in states with fewer immigrants.
But that doesn`t prove that immigration has little impact on the standard of living among our less fortunate fellow citizens. The cost of living in California is 48 percent higher than in, say, Tennessee, a state with few immigrants. A key factor: the cost of housing in California is 138 percent higher than Tennessee. Land prices are driven by supply and demand. Therefore, when the population goes up due to immigration, the price of land goes up.
In this article, I focus on the impact of the growing inequality at the top and bottom of society on the cost of middle class life.
Let`s look at three major cost components of middle class life: medical care, housing, and education.
What is the impact of increasing economic inequality getting on the cost of medicine? Are the ultrarich rapaciously bidding up the price of, say, chemotherapy the same way they have bid up the price of Gustav Klimt paintings?
Nah, not really. Chemotherapy is not something anybody wants to want to hoard all for himself. Trust me.
In fact, plastic surgery, notoriously the most discretionary item in medicine, has gone up less in price than most everything else has.
Some—but not all that much. In 21st Century America, the superrich generally don`t like to live like William Randolph Hearst in Hearst Castle, each on their own lonely mountains. They tend to crowd in near others of their rarefied ilk. Hence, they often take up less space than you might imagine.
In Manhattan, the rich stack themselves on top of each other. In Los Angeles, the median celebrity whose home buying or selling is deemed worthy of the Los Angeles Times` "Hot Property" real estate porn column lives on roughly one or two Southland acres.
Consider, for example, Cher. That energetic and enterprising veteran celebrity recently offered her ocean-view house in Malibu for sale at $41 million. How much bluff-top land do you get for $41 million? One point seven acres.
The rich do often own huge vacation and investment properties in scenic locations. Yet, those are typically too remote from jobs, too laden with environmental restrictions, or in too precipitous locations to be easily subdividable into middle class neighborhoods.
Finally, what about education? Do the fantastically wealthy crowd out the middle class?
To some extent, yes. I have been informed by several reliable sources that a discreet donation of $5 million to Harvard can go a long way toward moving one`s scion from the admissions waiting list to the accepted list. Likewise, in Manhattan, a sizable gift can help get your kid into a fashionable kindergarten.
Of course, we all know that if you want to play the social climbing game, there`s no end to how much you can pay. But what if you don`t particularly care about climbing up—you just don`t want your kids to be dragged down? In that case, the rich don`t matter as much. Do middle class parents have to pull their kids out of the schools that, say, James Cameron`s kids attend so they can learn? Do roving gangs of Bill Gates`s kids keep your kid from shooting baskets at the local park?
Now, think about the costs imposed on the middle class by the bottom of society—a bottom that has been greatly inflated in relative numbers by immigration policy.
Do poor people not get chemotherapy when they get cancer? Of course they do. We don`t live in some fictional Ayn Rand society. Poor people generally get cheaper, lousier health care than rich people, but they still get it. The overall cost of health care to the economy is more proportional to the number of people within the borders than to their ability to pay.
Under whatever system of health finance that eventually evolves, those who can afford to pay will, one way or another, subsidize the medical care of those who can`t, just as they do now. Currently, that shows up as taxpayer subsidies to the Emergency Rooms that the indigent poor use as a primary health care supplier, higher insurance premiums as hospitals pass through unreimbursed costs, and/or outright closure of Emergency Rooms and even hospitals.
What about housing? Do poor people take up space? Yes, in fact, more than you would think. The essential problem with being poor in 21st Century America is less that you can`t buy enough stuff and more that you can`t afford to get away from other poor people. Those who can afford to move away from the poor, do, driving up housing costs elsewhere. That sections of Detroit are reverting to forest, while the Detroit suburbs are booming, is only the most extreme example of the centrifugal impact of the poor. In Memphis, tearing down downtown housing projects and giving the poor Section 8 rental vouchers made downtown safe for the affluent, but simply drove crime into the inner suburbs.
Moreover, it has been national policy for many years to disperse the poor from the inner cities. In California in the last decade, easy credit from Countrywide and the like generated a rolling exodus outward from South Central Los Angeles into the exurbs and even into Arizona and Nevada, as zero down payment mortgages gave countless people hope that they could get their kids into a school district away from kids like … their kids.
Unfortunately, as Buckaroo Banzai pointed out, "No matter where you go, there you are". When people with no money started buying en masse into exurban Southern California neighborhoods with homes "worth" a half million dollars because of their "good schools", those schools were suddenly not quite so good anymore. And, very suddenly, those homes weren`t worth a half million dollars anymore, contributing to the financial crash of 2008.
All of which does not mean, however, that the rich have no share in the blame for the costs the poor impose upon the middle class.
As Rawlie Thorpe tells Sherman McCoy in Tom Wolfe`s novel Bonfire of the Vanities, "If you want to live in New York … you`ve got to insulate, insulate, insulate." The increase in income and wealth inequality means the rich are both more insulated from the problems of ordinary Americans. And, oddly, they are more influential over the media.
The latter is most noticeable in the decline in skepticism about the rich among journalists. For example, it ought to be completely obvious to even the most naïve newshound that the enthusiasm among the rich for mass immigration is not financially disinterested. Yet, the concept of conflict of interest is fading away among today`s journalists.
In the mid-20th Century, the press was more skeptical of the plutocrats because the class conflict was so apparent in how they dressed, spoke, and behaved. In the His Girl Friday era, the rich put on pompous upper class manners, while reporters indulged in the cynicism of the socially marginal. Ben Hecht, a Chicago reporter turned Hollywood screenwriter, described his first view of a newsroom in 1910: "hats tilted, feet up on top of typewriters, faces breathing out liquor fumes like dragons". Hecht summarized the reporters of his youth:
"They sat, grown and abuzz, outside an adult civilization, intent on breaking windows. There was, I am sure, neither worldliness nor cunning enough among the lot of us to run a successful candy store. But we had a vantage point. We were not inside the routines of human greed or social pretenses. We were without politeness. … Our noses were full of the odors of chicanery and human fatuousness."
Journalists today, though, tend to be sober, respectable, elite-educated, professional, conformist establishmentarians—more offended by uncouth opinions than by the self-interested hypocrisy of the upper class
Both the rich and the reporters have the same upper middle class casual manners. The rich don`t dress for dinner in boiled shirts, dickies, and watch chains anymore, while reporters don`t wear hats indoors., Everybody affects an easy equality—so it`s simple for the billionaires to seduce the media by graciously treating them, during interviews or at the annual Davos conference for plutocrats and pundits, as equals.
Of course, they aren`t equal. But this flattery that the zillionaires direct at the journalists, this pretense that we`re all in the same social class—the educated enlightened—makes it easier for the media to endorse the agenda of the rich.
Thus in Waiting for Superman, the new documentary about school reform that has been widely celebrated in the elite media, the conventional wisdom about the necessity of spending vastly more on fixing bad schools is espoused onscreen by various journalists, educators, and Bill Gates. A Rip Van Winkle who had been asleep from 1935 wouldn`t be able to tell from dress or speech which of the many interviewees clad in Dockers khakis is(or rather was)the world`s richest man.
Not surprisingly, the documentarian, Davis Guggenheim, shows no cynicism whatsoever about the altruistic purity of Gates`s motivations. In fact, Guggenheim is happy to relate Gates` excuse for why Microsoft hired all those H-1B visa programmers from India instead of hiring Americans. You see, Gates just had to import foreigners because American schools were so bad that there weren`t any programmers left in America. He had to!
In a Ben Hecht-scripted movie, a reporter would have whispered out of the side of his mouth to another reporter that, sure, Gates had to hire cheap labor from abroad to boost his net worth from $49 billion to $50 billion.
But, that kind of cold-eyed realism toward the rich on the part of the press has largely given way to warm, fuzzy feelings of class solidarity— the assumption that we elites are all working to help the poor, unlike those horrible bigots in the middle.
In a famous formulation, Yale economist William Graham Sumner described modern social policy as a process whereby "A and B put their heads together to decide what C shall be made to do for D." He described C as "The Forgotten Man." The American middle class continues to be forgotten. But what`s new here is that B is our supposedly independent Main Stream Media.
[Steve Sailer (email him) is movie critic for The American Conservative. His website www.iSteve.blogspot.com features his daily blog. His new book, AMERICA`S HALF-BLOOD PRINCE: BARACK OBAMA`S "STORY OF RACE AND INHERITANCE", is available here.]