The “Great Divergence” is a term coined by Nobel-prize winning economist Paul Krugman to describe the trend, over the past 30 years or so, of skyrocketing income inequality in the United States — of the rich getting richer and the poor getting poorer and the middle class growing ever narrower.
Timothy Noah’s new book by that name examines, in detail, the reasons for that divergence, digging into issues from tax policy to the decline of labor unions to globalization, pulling them all together to paint a picture of three decades of incremental change that have left many of us, at the end, wondering about just what hit us.
Noah doesn’t just leave us in despair, however—he offers solutions for reversing the trend, including universalizing education and revitalizing the labor movement. Mostly, though, his book is a wake-up call for those who haven’t yet felt the crisis in their personal lives: we all need to care about income inequality, because whether we like it or not, it impacts our entire society .
He took some time to talk to AlterNet about anger and resentment, about outsourcing and income taxes, student debt and the misperceptions many liberals hold about the labor movement.
Sarah Jaffe: I wanted to start with something you said at the end of the book about America being a meaner place today, how that may be fueled by resentments from the Great Divergence. I thought that was an interesting comment to make. Can you talk a little bit about that?
Timothy Noah: Sure. I think what I said was that America was an angrier place in the Sixties, but it’s a meaner place today. People were angry in the Sixties about injustices, but today I think, to some extent, the lack of anger reflects a kind of meanness and the resentment of other groups. By meanness I mean that kind of tribal hostility that’s grafted into American politics as the middle class and the affluent have become strangers to one another.
SJ: You make the point in the book that some people want to solve the income inequality crisis with socially unequal solutions, and that we need to recognize that income inequality is breeding social inequality and social distance.
TN: I do think that income-based inequality breeds social inequality. There are some people who say you can separate them – Mickey Kaus makes that argument – but I don’t think you can. If you look at societies that have a lot of social equality, they tend to have a lot of economic equality too. The US has a fair amount of social equality, but I think you could question whether that tradition is now being compromised by the advent of things like gated communities.
SJ: You go through, chapter by chapter, these different causes of the Great Divergence. Right now, during the presidential campaign, we’re hearing a lot about outsourcing and its impact on the jobs we still have in this country. One of the interesting points that you made was that there are certain high-skill jobs that are just as easy to outsource as the low-skill jobs that we’re used to thinking of as vulnerable.
TN: Outsourcing will remain a problem for the American economy, but it may cease being a contributor to income inequality as more and more high-skilled jobs are outsourced. There’s an important caveat to that, which is that we have not yet seen how the affluent will wield their political power in order to prevent outsourcing . There is some evidence in the past, when something like this has come up, that the affluent have a much greater ability to control government policy. We may find that many of the same affluent who have been lecturing the working class for decades now about the virtues of free trade will change their views of free trade once it’s their jobs on the line.
SJ: When we start outsourcing economists?
TN: Right. (Laughs) In fact, Dean Baker is the person I quote making this point and I think it’s an interesting one.
SJ: You talk about the point he makes, that we could allow immigration in certain high-skill fields, and that would have an effect on income inequality.
TN: Yes, and that’s an interesting point of agreement between Dean Baker and Alan Greenspan. I think it’s the one idea in my solutions chapter that will probably be embraced more wholeheartedly by Republicans than by Democrats, because business has been pushing for more of these kind of H-1B visas over the years. I think there is an argument to be made for them based on equality.
SJ: Although in certain high skilled fields we are already seeing problems because of money. We have a primary care doctor shortage because medical students are going into specialties because they can’t afford to pay off their student debt as a primary care doctor – specialists make more money. So if we started allowing doctors to come into the country then we’re really going to have a problem with the wages going down in fields that are really expensive to become qualified for.
TN: Well, that speaks to a whole other issue, which is the rising cost of education. I don’t think you can fix that by fine-tuning a student loan program. I think you can only fix it by limiting the amount of debt that gets taken on in the first place and that means you have to limit tuition increases.
SJ: You have another long thoughtful chapter on the college wage premium. But as student debt keeps going up, it’s going to start eating into that college premium, especially for people like me who had liberal arts degrees that don’t tend to have a great wage boost when you get out of school.
TN: Right, but the cost of not going to college is so great that it would take a lot to reverse that premium. The college premium is no longer growing, but it has given way to the grad school premium. The reason that tuition has gone up so much is the “because they can” argument that I quote. College tuition has to be really, really high to make it not worthwhile to anybody. What’s happening now is it remains worthwhile to a big segment of the population – it’s increasingly not even affordable or achievable to people at the lower end of the income scale.
SJ: It’s less that the college premium has gone up and more that we just don’t have the sort of union jobs that we used to have, the middle class job that you could do with a high school diploma and raise your family on. It increasingly doesn’t exist and so you have to go to college just to get a decent job.
TN: A lot of people think you shouldn’t talk about the education part of the Great Divergence because it somehow plays into the hands of conservatives who want to blame everything on the state of our education system. Conservatives don’t mind beating up on colleges for jacking up tuition because they don’t really like colleges in the first place.
That’s only half of the story. The other half of the story is the decline of labor because that has been an alternative path to a middle class income.
SJ: More people got a middle class manufacturing job than had gone to college and gotten a white-collar job up until not that long ago.
TN: Yes, it was this very good alternative path and it’s been dwindling because of the decline of labor unions. That is, I think, as large a problem as the problem of education being unaffordable at the top end and inadequate in the case of K through 12 years and the high school graduation rates not increasing sufficiently and so on. The decline of labor, it’s a pretty simple story, but it’s an important story and I think it’s the biggest challenge facing liberals today.
It’s the part of the book that liberals least want to hear. They just kind of make a face. Liberals have lost their faith in unions. They will defend them when they’re under attack from conservatives, but they have no great enthusiasm for them and the economic agenda has not been front and center for liberalism lately.
SJ: I think Democrats and mainstream liberals were really caught unaware by the economic crisis. And it made everybody aware of this trend that you write about, that has been going on for the last 30-odd years. Liberals had no response to the crisis, which is what I think gave us the Tea Party. And when Wisconsin happened and when we started to see labor uprisings – well, conservatives had known that they needed to attack unions, but liberals didn’t know that they needed to defend them.
TN: They’re massively ambivalent about unions. Partly because the liberals of today, like conservatives today, were reluctant to defend institutions in general. All institutions are susceptible to corruption and unions are no exception. We all can think of plenty of examples of horribly corrupt unions, but I think that’s where a lot of thinking among liberals stops. Also, unions were hard to defend in the 70s and 80s when they were seen as intransigent in facing competitive pressures. What a lot of people, including myself, couldn’t really see was that it was the labor movement itself that was under attack. It wasn’t just the particular demands of individual labor unions …