Declining well-being of Americans

Professor Peter Turchin explains his observation that the well-being of Americans has been declining over the last four decades — a process called immiseration:

Last year I had an interesting conversation with someone I’ll call the Washington Insider. She asked me why my structural-demographic model predicted rising instability in the USA, probably peaking with a major outbreak of political violence in the 2020s. I started giving the explanation based on the three main forces: popular immiseration, intra-elite competition, and state fragility. But I didn’t get far because she asked me, what immiseration? What are you talking about? We’ve never lived better than today. Global poverty is declining, child mortality is declining, violence is declining. We have access to the level of technology that is miraculous compared to what previous generations had. Just look at the massive data gathered together by Max Rosen, or read Steven Pinker’s books to be impressed with how good things are.

There are three biases that help sustain this rosy view. First, the focus on global issues. But the decrease of poverty in China (which is what drives declining global poverty, because Chinese population is so huge), or the drop in child mortality in Africa, is irrelevant to the working America. People everywhere compare themselves not to some distant places, but to the standard of living they experienced in their parents home. And the majority of American population sees that in many important ways they are worse off than their parents (as we will see below).

Second, the Washington Insider talks to other members of the 1 percent, and to some in the top 10 percent. The top-income segments of the American population have done fabulously in the last decades, thank you very much.

Third, many economic statistics have to be taken with a grain of salt. […]

So what has been happening with the well-being of common, non-elite Americans? In my work I use three broad measures of well-being: economic, biological (health), and social.

Briefly:

-Economic: Wages of non-elite workers show “rapid, almost linear growth to the late 1970s, stagnation and decline (especially for unskilled labor) thereafter”; the “relative wage” (the nominal wage divided by GDP per capita) drops sharply after 1960; labor participation has been trending downward regardless of education level since at least the late 1970s.

-Biological: Average height of native-born Americans stopped growing after the 1980s (and has declined for some demographic groups); life expectancy growth has lagged behind Western Europe and for some groups, life expectancy has declined in absolute terms; suicide rates are climbing for all ethnic groups.

-Social: Average age of marriage and percentage of people unmarried are on the rise.

Remember when the original Star Wars came out? That was around the historic peak of American economic, social and biological well-being. Hard times are coming, and for an increasing number of people, have already arrived.

American serfs

Steve Bannon provides a useful metaphor for the economic state of current-day Homo Americanus:

All the economic textbooks you’ve got before 2008? Throw them out. They’re totally irrelevant.

Your generation, the readers of New York Magazine, you’re nothing but 18th-century Russian serfs. You’re better fed, and you’re better dressed, and you’re better educated. But you don’t own anything. And you’re not going to own anything.

The state capitalism of the big technology companies has taken away your digital, your data sovereignty. They’ve totally taken it away. You generate intellectual property all day long, and they don’t pay you for it. They take it for free, they monetize at huge margins.

The quote is from a fascinating interview regarding the aftermath of the 2008 financial crisis. There is surely a connection between the decline of private ownership in the US — ranging from homes and cars to technology and books — and the rise of a permanent class of social media serfs who create content for free. The collapse of ownership is also a useful framework for measuring the actual wealth and economic well-being of Americans. Are you wealthy if you have access to everything you want, but you own nothing? Obviously not, because access can be revoked, whereas property can only be taken away with difficulty, if at all.

On a more practical note, Bannon sees big economic policy changes ahead:

But now McMaster is gone, Cohn is gone, Tillerson’s gone. Look what Trump’s done in six months. He’s reorganized the world’s commercial system. We’re very close to having a massive reorganization in six months. The Wall Street stuff will all come. Trump wants to make sure first, get the economy revved back up again —

What if it doesn’t?

Well, the economy is going to be at 4 percent growth. Wages are going to start to follow. We’ve got time. You can’t do everything at one time. Let’s change the world’s commercial relationships and change the supply chain away from China, okay? First off, that would be Herculean, because for 30 years we looked the other way and exacerbated and we helped its growth.

Daily links: Economic stresses mount

Debbie Downer

We apologize for this depressing post

The rate of seniors filing for bankruptcy has tripled since 1991. The elderly have little financial cushion in the event of catastrophic health problems, and of course medical costs are rising. And more people are entering retirement age with debt.

More people are living in their cars as homelessness rises in America. “The problem is ‘exploding’ in cities with expensive housing markets, including Los Angeles, Portland and San Francisco, according to Governing magazine.”

Outstanding education debt in the US now exceeds $1.5 trillion (roughly the GDP of Australia), after tripling over the last decade, and more than one million student loan borrowers go into default each year.

The average American works longer hours than a medieval peasant: “Juliet Shore, economist, told the site that during periods of high wages, such as 14th-century England, peasants worked no more than 150 days a year.”