Opinion

Chrystia Freeland

Modern capitalism isn’t working for the middle class

Chrystia Freeland
Sep 20, 2011 17:16 UTC

We know one thing for sure: the gap between rich and poor in the United States has widened in the past 30 years. In 2007 the top 1 percent of earners took home 18.3 percent of national income — that is more than two and a half times their level in 1973, when their share was 7.7 percent. Those at the top haven’t enjoyed such a big slice of the national pie since 1929. The middle-class dominated nation that the Greatest Generation inhabited has become as polarized as the plutocracies of Latin America or as America itself was during its fevered Gilded Age.

For a long time, the United States was in denial about its growing income gulf. The middle class clung to the old promise of mass affluence — and used home equity loans and credit card debt to make that dream real.

The elite, particularly the conservative intellectuals who have dominated the national economic debate since the Reagan era, insisted that growing income inequality was propaganda invented by the class warriors on the left, and cited robust consumer spending as evidence. In a 1998 speech at Jackson Hole at the annual gathering of American economists and economic policy makers, Alan Greenspan, then chairman of the Federal Reserve, argued that what mattered was what people could buy, not what they earned.

“Inequality in consumption, when measured by current outlays, is less than inequality in income,” he said. Greenspan illustrated his point with some unusual measures of inequality — ownership of consumer goods like dishwashers, microwaves and clothes-dryers. The comforting result? Even though inequality as measured in dollars was growing, when measured in dishwashers, microwaves and clothes dryers it was decreasing.

The 2008 financial crisis and the prolonged economic downturn has eviscerated the consumption defense as ruthlessly as it has burst the credit bubble that allowed the middle class to feel richer than it was. Income inequality is today a fact of life, as essential to doing business as the rate of inflation: Proctor & Gamble executives study the Gini co-efficient, a technical measure of income inequality, to divine what is happening to their erstwhile middle-class consumer base, and have decided the best strategy is to give up on the center and to market instead to the top and the bottom.

The superpower vacuum

Chrystia Freeland
Sep 19, 2011 16:34 UTC

Where is a superpower when you need one?

Many Americans suspect that their country’s relative decline is being met with gloating in other parts of the world — and not just in the dictatorships that have good reason to fear a strong United States. Americans imagine that even many firm friends have long nursed quiet resentments of the rule of their big brother, and that those historic slights mean a certain pleasure is being taken in America’s waning.

Those suspicions aren’t wrong. If you have trouble understanding how even the most ardent ally can also have a younger sibling’s sense of grievance, watch “In the Loop,” the BBC comedy loosely based on the run-up to the 2003 invasion of Iraq.

In one scene, the British prime minister’s enforcer, a character modeled on Alastair Campbell, arrives at the White House for a meeting on the impending war only to discover that his counterpart is a 22-year-old. His poetically obscene response is classic Campbell, and an illustration of why even some loyal Brits might not be totally dismayed by the humbling of the superpower.

The curse of the bull elk antlers

Chrystia Freeland
Sep 8, 2011 21:34 UTC

As the United States prepares to commemorate the tenth anniversary of the 9/11 attacks this weekend, one of the most striking contrasts is between a country that was united in the face of a foreign enemy a decade ago, and that same nation today, which is so bitterly divided as it confronts domestic challenges of equal, if not greater, magnitude.

Most Americans do agree on one thing — the polarization and paralysis are the fault of failed politicians and a flawed political system. As a unifying rallying cry, this pox-on-all-their-houses approach has much to recommend it.

But what if the problem goes deeper than politics and politicos? Maybe America’s national discord is rooted in structural factors that even the most talented leader and effective political system would struggle to fix.

Will belief trump facts?

Chrystia Freeland
Sep 2, 2011 14:59 UTC

You might call it the cognitive divide — the split between an evidence-based worldview and one that is rooted in faith or ideology — and it is one of the most important fault lines in the United States today.

President Barack Obama called attention to the cognitive divide, and reminded us which side he comes down on, at the beginning of this week, when he chose the Princeton University economist Alan Krueger to lead his Council of Economic Advisers.

Krueger is a labor economist, and at first blush, that focus may seem the important part of his résumé. Unemployment, after all, is still above 9 percent, and the president has said job creation is his priority. But when you talk to the insiders about Krueger, what they emphasize is his mastery of data and his utter commitment to the truths it can be coaxed to tell.

Middle East’s “Game of Thrones”

Chrystia Freeland
Aug 26, 2011 15:12 UTC

“When you play the game of thrones, you win or you die. There is no middle ground.” That’s a line from “Game of Thrones,” the new HBO television series that is conquering American popular culture.

But it could just as easily refer to the no-holds-barred battles we are watching in Libya and Syria. What is hardest to grasp is how these regimes are both strong and brittle. Their rulers are ruthless dictators prepared to do whatever it takes to stay in power — and for decades that can work. Until, suddenly, it does not.

We are not very good at understanding the win-or-die dynamic of these sorts of political systems: Not so long ago, everyone from the U.S. State Department, to Harvard, to the London School of Economics, to Vogue magazine, to blue-chip Wall Street money managers treated the Assads and the Qaddafis like rulers capable of gradual liberalization and even democratization.

The case for open-source government

Chrystia Freeland
Aug 18, 2011 21:14 UTC

Maybe we are all thinking too much like Bolsheviks and not enough like Googlers. For Lenin and the Russian revolutionaries, the big question was “Kto kogo?” — essentially, “Who has the upper hand?”

Kto kogo remains the paradigm at the center of the fiscal battles roiling the Western world: young vs. old; rich taxpayers vs. poor welfare beneficiaries; public sector workers vs. private sector ones; wealthy Northern Europe vs. bankrupt Southern Europe; small government conservatives vs. big government liberals.

But a few people — writers, activists, even politicians — are examining the current woes of the Western state through a very different prism. You could call it the Government 2.0 approach, and its fundamental thesis is that the biggest question is not how much to spend and how much to tax, it is how to adapt the state to the information age.

Remedying recession, reducing debt

Chrystia Freeland
Aug 12, 2011 20:46 UTC

We all know there are three important things about real estate: location, location, location. That double repetition, which the late and great word sleuth William Safire traced back to a 1926 Chicago Tribune classified ad, is still with us because it is succinct and true.

You can think about the economic and political woes of the Western world today in the same way. It’s all about jobs, jobs, jobs.

But over the past two weeks the political battles over government debt in Washington and Frankfurt, the street battles in Britain, and the volatility of markets everywhere have obscured that reality. The talk instead has been about share prices, credit ratings, police tactics and political dysfunction.

What happens when citizens lose faith in government?

Chrystia Freeland
Aug 5, 2011 14:32 UTC

Tolstoy thought unhappy families were unique in their unhappiness.

But when it comes to countries, these days the world’s gloomy ones have a lot in common. From Fukushima to Athens, and from Washington to Wenzhou, China, the collective refrain is that government doesn’t work.

“2011 will be the year of distrust in government,” said Richard Edelman, president and chief executive of Edelman, the world’s largest independent public relations firm.

For the past decade, Mr. Edelman has conducted a global survey of which institutions we have confidence in and which ones are in the doghouse. In 2010, the villains were in the private sector — from BP, to Toyota, to Goldman Sachs, corporations and their executives were the ones behaving badly.

The West is getting old

Chrystia Freeland
Jul 28, 2011 22:08 UTC

It’s the demography, stupid.

There are a lot of different reasons this is turning out to be such a politically hot summer in so much of the Western world. But one way to understand this season’s acrimony — from the protests of the indignati in Spain and Greece, to the budget deadlock in Washington and even to the tragedy in Norway — is as diverse symptoms of a shared condition: The West is getting old. That demographic fact is becoming a generational war, and there is every reason to believe that in the coming decades it will get worse.

The heart of the problem is arithmetical: The post-World War II social welfare state, created at a moment when the baby boom was still gestating, is built on a generational Ponzi scheme. As life expectancy increases and fertility declines, that population pyramid is being inverted — and in some countries, that is causing the entire economy to topple.

That’s true in Greece and Spain, where the young are taking to the streets partly because state pension commitments have become so heavy they are suffocating the economy and depriving the seniors’ grandchildren of any chance of a job. Likewise in the United States, where, notwithstanding the national self-image as a laissez-faire land that has eschewed Europe’s lavish social safety net, the budget battle is really a fight about the old: Programs for the elderly constitute almost half of non-interest government spending, about $1.6 trillion in 2010, of a $3.3 trillion total. That figure will swell as the baby boomers retire.

Scenes from the Tea Party

Peter Rudegeair
Jul 11, 2011 22:00 UTC

Theda Skocpol, Vanessa Williamson, and John Coggin’s great paper “The Tea Party and the Remaking of Republican Conservatism” formed the basis of Chrystia’s most recent column. As part of their research, Skocpol and her team embedded themselves in the Greater Boston Tea Party, the thirty-third largest Tea Party organization in the country, as measured by membership in the social-networking website MeetUp. The trio of scholars attended the group’s local rallies and conducted an extensive survey with 79 of the group’s members. The portrait of Tea Partiers that emerged from their fact-finding reinforced what many had observed anecdotally: Tea-Party members tend to be older, white males who are avid viewers of Fox News and have a history of political activism.

Like their fellow Tea Partiers across the United States, those in Massachusetts are older, white, and predominately male. 97 percent are white; 57 percent are males; and 83 percent are over forty-six years old (with more than half are older than age fifty-six). In addition, Bay State Tea Party activists envelop themselves with the same conservative news sources used by other Tea Party participants. When we asked Massachusetts Tea Party activists an open-ended question about their preferred news sources, 51 out of 69 respondents reported being Fox News watchers. As has also been found in national studies, few Massachusetts Tea Partiers are seeking out neutral or left-leaning sources of information. Only 11 of 69 respondents claim to read the Boston Globe, and only seven Massachusetts Tea Party activists report getting their news from ABC, NBC or CBS News. Like Tea Partiers nationally, many in Massachusetts are campaign veterans. In our Boston sample, 37 out of 79 respondents claimed to have previously volunteered on behalf of a candidate or political organization.

Fox News viewership in particular seemed to be an animating force for the Party and a prime topic of their conversation:

  •