Unforeseen Consequences Of Social And Economic Dysfunction In 2016

Richard Florida writes about social and economic theories in the context of a changing urban environment. He teaches at the University of Toronto and his best known books are The Rise of the Creative Class, Cities and the Creative Class and The Flight of the Creative Class, which make the case that the accellorated economic development in urban areas is attributable to an open, accepting and dynamic environment because of what he calls "high bohemians" or the "creative class"-- artists, musicians, gays, technology nerds. Although some critics dismiss his work as elitist, he's on to something very real, if not always very appetizing.

Yesterday I noticed that Chris Cillizza's Washington Post column, 2016: The Race To The Bottom Election elicited a Twitter Storm from Florida. Cillizza's piece was inspired by a memo from a White House aide, Doug Sosnik, analyzing the context of the 2016 races.

"In this period of profound alienation, with both parties engaging in harsh ideological primaries, the public is likely to view the entire political process as a race to the bottom. They will be inclined to view their choice for president through the prism of which candidate is the least flawed and poses the least threat to their future well-being... The country is undergoing the most significant economic, technological, and demographic changes since the Industrial Revolution. Such change in any one of these areas would test our ability to adapt. But the fact that we are experiencing all of these shifts at the same time has exacerbated Americans’ fears and fundamental distrust of those in power. The public has concluded that our 20th century institutions are incapable of dealing with 21st century challenges."

Cillizza contends that Herr Trumpf's "entire candidacy, in fact, is illustrative of Sosnik's point: The real estate mogul is presenting a sort of dystopian view of America-- things are bad and not getting better-- and casting himself as the lone, last chance the country has to turn itself around. In normal times, that would be the kiss of death. In this race, it has been a rocket that Trump has ridden to the top of the polls."

What caught Florida's attention was this line: "The public has concluded that our 20th century institutions are incapable of dealing with 21st century challenges." Right up his alley! He tweets that "The basic thesis [of Cillizza's story] is that the election is occurring at a time of epochal economic, demographic & social change."

And then his own response:

He points to former crackpot (and crack head) Toronto Mayor Rob Ford as the precursor to Trumpism and asserts that as the profound social and economic changes kick in the "dealignment phase is volatile, unpredictable & dangerous. Odd things (like the rise of Rob Ford) can happen." And Herr Trumpf.

He seems somewhat optimist because "America has always led the world in finding ways to realign its political structures in ways that leverage big economic transformations" but warns that this elect is part of a "test of whether it can do so again" and writes it'll "require a progressive, inclusive vision of a post-industrial knowledge economy where everyone is included & rewarded. To get beyond Trumpism require[s] a vision of a post-industrial society which goes beyond just crass materialism. To my mind, such a progressive agenda turns on the recognition that every single human being is creative. And that developing economic & social structure to harness the full creativity of each is the key to creating real meaning & purpose."

He went on to say that he feels "the party structures block" meaningful participation from those quarters-- think Debbie Wasserman Schultz, Chuck Schumer, Harry Reid, Steve Israel, Rahm Emanuel, Chris Van Hollen, Steny Hoyer as examples of Democrats in party leadership roles... not exactly revolutionaries. "Some would say," he tweeted, "major investors in both parties have blocked this shift. In doing so, they have opened pandora's box" and acknowledges that "Mainstream media bares some of the blame-- reality TV, focus on 'crazy' people ... Helped create lane for Trump."

Five hours later he was suggesting people read a new article, Rise of the Renters , for The Atlantic, which points out that the "share of U.S. households that rent increased from 36% in 2006 to 41.1% in 2014, that the "share of renters among Millenialls 18-34 yr olds rose 7.6%, from 62.5% to 71.6% [and that] renter share of 26-34 yr olds rose 10.9% and warned ominously about a housing cost squeeze: "rents increased by 22.3% between 2006 to 2014, while average incomes declined by 5.8%. Income devoted to rent by the lowest income households increased from 55.7% in 2006 to a staggering 62.5% in 2014."

Before we get to The Jam, let me end with one little tiny thing, namely that the world's most famous economist-- sorry Krugman-- says Bernie could change the face of the country. That's certainly his intention, of course, but Thomas Piketty is impressed with his rise.

From the 1930s until the 1970s, the US were at the forefront of an ambitious set of policies aiming to reduce social inequalities. Partly to avoid any resemblance with Old Europe, seen then as extremely unequal and contrary to the American democratic spirit, in the inter-war years the country invented a highly progressive income and estate tax and set up levels of fiscal progressiveness never used on our side of the Atlantic. From 1930 to 1980-- for half a century-- the rate for the highest US income (over $1m per year) was on average 82%, with peaks of 91% from the 1940s to 1960s (from Roosevelt to Kennedy), and still as high as 70% during Reagan’s election in 1980.

This policy in no way affected the strong growth of the post-war American economy, doubtless because there is not much point in paying super-managers $10m when $1m will do. The estate tax, which was equally progressive with rates applicable to the largest fortunes in the range of 70% to 80% for decades... [T]he US also set up a federal minimum wage. In the late 1960s it was worth $10 an hour (in 2016 dollars), by far the highest of its time.

All this was carried through almost without unemployment, since both the level of productivity and the education system allowed it. This is also the time when the US finally put an end to the undemocratic legal racial discrimination still in place in the south, and launched new social policies.

All this change sparked a muscular opposition, particularly among the financial elites and the reactionary fringe of the white electorate. Humiliated in Vietnam, 1970s America was further concerned that the losers of the second world war (Germany and Japan in the lead) were catching up at top speed. The US also suffered from the oil crisis, inflation and under-indexation of tax schedules. Surfing the waves of all these frustrations, Reagan was elected in 1980 on a program aiming to restore a mythical capitalism said to have existed in the past.

The culmination of this new program was the tax reform of 1986, which ended half a century of a progressive tax system and lowered the rate applicable to the highest incomes to 28%.

Democrats never truly challenged this choice in the Clinton (1992-2000) and Obama (2008-2016) years, which stabilized the taxation rate at around 40% (two times lower than the average level for the period 1930 to 1980). This triggered an explosion of inequality coupled with incredibly high salaries for those who could get them, as well as a stagnation of revenues for most of America-- all of which was accompanied by low growth (at a level still somewhat higher than Europe, mind you, as the old world was mired in other problems).

Reagan also decided to freeze the federal minimum wage level, which from 1980 was slowly but surely eroded by inflation (little more than $7 an hour in 2016, against nearly $11 in 1969). Again, this new political-ideological regime was barely mitigated by the Clinton and Obama years.

Sanders’ success today shows that much of America is tired of rising inequality and these so-called political changes, and intends to revive both a progressive agenda and the American tradition of egalitarianism. Hillary Clinton, who fought to the left of Barack Obama in 2008 on topics such as health insurance, appears today as if she is defending the status quo, just another heiress of the Reagan-Clinton-Obama political regime.

Sanders makes clear he wants to restore progressive taxation and a higher minimum wage ($15 an hour). To this he adds free healthcare and higher education in a country where inequality in access to education has reached unprecedented heights, highlighting a gulf standing between the lives of most Americans, and the soothing meritocratic speeches pronounced by the winners of the system.

Meanwhile, the Republican party sinks into a hyper-nationalist, anti-immigrant and anti-Islam discourse (even though Islam isn’t a great religious force in the country), and a limitless glorification of the fortune amassed by rich white people. The judges appointed under Reagan and Bush have lifted any legal limitation on the influence of private money in politics, which greatly complicates the task of candidates like Sanders.

However, new forms of political mobilization and crowdfunding can prevail and push America into a new political cycle. We are far from gloomy prophecies about the end of history.