Follow the trail from a growing plutocracy to decaying families

Summary:  The social and economic evolution of America will shape 21st century America. This post ties together our rising inequality, falling social mobility, crashing system of higher education, dropping labor force participation, and falling rate of family formation. Another generation of these trends and we’ll have a New America. Time is not our friend.

"I am John Galt" t-shirt
Available at Amazon.

 

Contents

  1. Looking backwards.
    …..Looking forward.
  2. Inequality: the political revolution.
  3. Social mobility: education failure.
  4. The next gen of America:
    …..indentured servitude.
  5. Men are “Going Galt.”
  6. For More Information.

 

(1) Looking backwards. Looking forward.

In times of rapid change we rely on economists to explain what has happened. However they are usually poor at seeing changes happening now (often they deny their existence, believing that what has been in the past must be so in the future). The massive changes in the social structure of America illustrate how we need their analysis, but have to look beyond it. Let’s trace the logic from our past to our future.

"Saving Capitalism" by Robert Reich
Available at Amazon (2015).

(2)  Inequality: the political revolution

Robert Reich has published another book providing an essential analysis of our time: Saving Capitalism: For the Many, Not the Few. How did we get into this mess?

{It’s} a myth-shattering breakdown of how the economic system that helped make America so strong is now failing us, and what it will take to fix it. … he reveals how power and influence have created a new American oligarchy, a shrinking middle class, and the greatest income inequality and wealth disparity in 80 years. He makes clear how centrally problematic our veneration of the “free market” is, and how it has masked the power of moneyed interests to tilt the market to their benefit.

Reich exposes the falsehoods that have been bolstered by the corruption of our democracy by huge corporations and the revolving door between Washington and Wall Street … He shows that the critical choices ahead are not about the size of government but about who government is for: that we must choose not between a free market and “big” government but between a market organized for broadly based prosperity and one designed to deliver the most gains to the top. …

Paul Krugman’s typically brilliant review in the New York Review of Books expands on Reich’s analysis, putting it in a broader context of history and the evolution of economists’ explanations for trends since the 1970s. The bottom line…

Reich makes a very good case that widening inequality largely reflects political decisions that could have gone in very different directions. The rise in market power reflects a turn away from antitrust laws that looks less and less justified by outcomes, and in some cases the rise in market power is the result of the raw exercise of political clout to prevent policies that would limit monopolies … Meanwhile, forms of market power that benefit large numbers of workers as opposed to small numbers of plutocrats have declined, again thanks in large part to political decisions.

These changes in the American economy have their greatest effect on our youth, the Millennials (born 1982 – 2004). But that’s not the only headwind on their lives.

(3)  Social mobility: education failure

Higher education was the major engine of higher mobility in the post-WWII era. Years of work by the conservatives to defund it has paid off: “Alarming Research Shows the Sorry State of US Higher Ed” by Andrew McAfee (Professor, MIT School of Management), Harvard Business Review, 11 July 2013 — Excerpt…

… important things are breaking down in the US higher education system. Whether or not this system is in danger of collapsing it feels like it’s losing its way, and failing in its mission of developing the citizens and workers we need in the 21st century.

… only a bit more than half of all US students enrolled in four-year colleges and universities complete their degrees within six years, and only 29% who start two year degrees finish them within three years. America is last in graduation rate among 18 countries assessed in 2010 by the OECD. Things used to be better; in the late 1960s, nearly half of all college students got done in four years.

… These declines in learning and graduation rates come during a time of exploding costs. the Pew Research Center found that the price of a private college education tripled between 1980 and 2010, and that average student loan debt for bachelor’s degree holders who had to borrow was more than $23,000 in 2011. This debt is not dischargeable even in bankruptcy, and is certainly not erased if you fail to graduate.

Now for the bad news, in a book by sociology professors Richard Arum (NYU) and Josipa Roksa (U VA): Academically Adrift: Limited Learning on College Campuses (2011).

Academically Adrift: Limited Learning on College Campuses
Available at Amazon (2011).

In spite of soaring tuition costs, more and more students go to college every year. A bachelor’s degree is now required for entry into a growing number of professions. And some parents begin planning for the expense of sending their kids to college when they’re born.

Almost everyone strives to go, but almost no one asks the fundamental question posed by Academically Adrift: are undergraduates really learning anything once they get there? For a large proportion of students, Richard Arum and Josipa Roksa’s answer to that question is a definitive “no.”

Their extensive research draws on survey responses, transcript data, and, for the first time, the state-of-the-art Collegiate Learning Assessment, a standardized test administered to students in their first semester and then again at the end of their second year. According to their analysis of more than 2,300 undergraduates at twenty-four institutions, 45% of these students demonstrate no significant improvement in a range of skills — including critical thinking, complex reasoning, and writing – during their first two years of college. and 36% improved not at all after four years. {The average improvement on the test after four years was quite small.}

We have drawn up the ladder, leaving many young people from poor and lower classes on the ground. But conservatives have a solution…

(4)  The next gen: indentured servitude

Some propose that America take a giant step back in time: “Investors buying shares in college students: Is this the wave of the future? Purdue University thinks so.“, WaPo, 27 November 2015 — Excerpt…

This week, Purdue University took a step toward answering some of those questions by partnering with Vemo Education, a Reston-based financial services firm, to explore the use of income-share agreements, or ISAs, to help students pay for college.

Through its research foundation, the school plans to create ISA funds that its students can tap to pay for tuition, room and board. In return, students would pay a percentage of their earnings after graduation for a set number of years, replenishing the fund for future investments. Purdue is relying on Vemo, along with nonprofits 13th Avenue Funding and the Jain Family Institute, to flesh out the terms.

There’s nothing new about ISAs. Economist Milton Friedman floated the idea in the 1950s, and a handful of Latin American countries use the agreements. Yet they have been slow to catch on in the United States.

American imitating Latin America! That’s got to end well. Alex Tabarrok, a conservative Professor of economics at George Mason U, loves the idea.

In the 1960s and the 1970s the Boomers’ enjoyed low-cost quality college education, while America had strong social mobility and economic growth. Now the Boomers leave an America mired in slow growth, rising inequality, falling social mobility, with students mired in debt after their high-cost low quality education — and are bringing back Indentured servitude.

(5)  Men are “Going Galt”

“There is an economic logic that shapes our ends, rough-hew them how we will.”
— What Hamlet would say if he lived today.

Expensive education, decreasing economic return to education (income above cost), decreasing social mobility, stagnant or even falling income for the lower middle class, slower national income — these things combine to create a difficult situation for many young Americans. What is the return for joining the rat race, vs. that of the alternative path: more leisure, easy sex, porn, sports, and computer games?

Women’s unleashed hypergamy and contempt for betas and omega makes the calculus even less appealing for family and rat race. The results are evident in the data about America.

Percent of men 20 years and older who are working on the books

Labor Force Participation - men

Percent of men dropping out of the family game

PEW poll of the never married, September 2014
Record Share of Americans Have Never Married” (September 2014).

In Ayn Rand’s Atlas Shrugged the wealthy “go Galt” and stepping away from the rat race to let the rest of society fend for itself. Now, in one of the most unanticipated turns of history, it appears that many young men are “going Galt”. For more about a result of these changes, reshaping American society, see…

Men are “going Galt”. Marriage is dying. Will society survive?

Note: The Economist, as always rigidly conventional in outlook, describes this problem as one of women unable to find men worthy of them. That’s a factor, but there is a larger factor at work — as seen in women’s complaints about men “unwilling to commit” and the “Peter Pan Syndrome” (vs. few men complaining about women’s unwillingness to marry).

(6)  For More Information

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