Question of the week: Is the USA becoming more and more “South American”?

from Merijn Knibbe

Am I right that the USA is becoming more and more ‘South-American’, with very high income inequality, poor public services for the poor and excellent medical and educational services for the rich, lots of poorly paid manual and domestic workers and nanny’s, racial tensions and corrupt politics?

Comment from Peter Radford

My guess, is that the huge rise in inequality has shifted the way in which rising employment translates into rising demand. With the current distribution of incomes, the level of employment necessary to get sustainable strong growth may well be beyond our reach. The entire potential has shifted downwards because of the skewed way in which profits have taken a steadily increasing portion of productivity growth. Sooner or later this imbalance has to show up the way you describe. Now may well be the time. What is surprising, perhaps, is how supine the workforce has been throughout the entire shift.

As for your general observations about the US. I moved here from the UK in 1977. Since then I have witnessed an almost willful attempt to allow the nation’s basic services and infrastructure to deteriorate. It is difficult to convey the enormous gulf that now separates the life experience of the wealthy and that of the poor. Worse still is the indifference that pervades to the problems. The crucial longer term issue is the erosion of the vaunted American middle class lifestyle: rising educational and health care costs, coupled with stagnant wages have slowed, if not eliminated, the progression through the famous “American Dream”. Social mobility here is more rigid than in Europe for those born here, so the “dream” really exists only for immigrants. There seems to be no doubt that my children face a much more difficult future than I did. While that may be common throughout the industrial world, the impact it has here, where social flexibility is a major feature of the nation’s psyche, is proportionately greater. This is one factor underlying the more extreme nature of our politics: the dissatisfaction is palpable, yet hard to remedy since we have executed a very free market, pro-capitalist, set of policies that resonates with the core of America. To fix things we need to alter that core. I doubt that will change quickly, if at all. So we have arrived at a dead end and need new ideas. But the political system is unresponsive, corrupt, and diffuses power. That leaves the potential for special interest groups to have enormous power and hold up reform.

That sounds very “South American”. But we shouldn’t over play it. The entire industrial world is having to rethink the socioeconomic arrangements created after World War II, so America is not alone.