Ferguson: The End of the American Dream

Niall Ferguson on the new stasis in the US economy:

The real problem may be more insidious than the figures about income and wealth distribution imply. Even more disturbing is the growing evidence that social mobility is also declining in America.

The distinction is an important one. For many years, surveys have revealed a fundamental difference between Americans and Europeans. Americans have a much higher toleration for inequality. But that toleration is implicitly conditional on there being more social mobility in the United States than in Europe.

But what if that tradeoff no longer exists? What if the United States now offers the worst of both worlds: high inequality with low social mobility? And what if this is one of the hidden structural obstacles to economic recovery? Indeed, what if current monetary policy is making the problem of social immobility even worse?


That’s a feature, not a bug.

Elites are happy to pay higher taxes to maintain a dependent class at the subsistence level, provided there are enough entry barriers to joining the elites. It’s better to pay a little more and stay safe, than it is to pay less but face hungry competitors. It’s an ancient trick, probably dating back to the beginnings of human society. And the system can be as cruel as India’s caste system, or as (comparatively) munificent as feudal Europe. The trick is, to keep the lower classes just happy enough that they don’t notice the boot on their throat.

Witness, in recent years, the tripling in food stamp payouts — even as the economy and the jobs situation both improve. The jobs might be low-paying and dead-end, but that’s kind of the point, isn’t it?

Similarly, big business loves big government. Big government squeezes out entrepreneurs, and big business greases the wheels for implementing big government’s designs. Big labor does its part by acting as the feudal guild for favored workers.


In both cases (and they go hand-in-hand) the result is the same: Stagnation, economically and culturally. But again, that’s kind of the point, isn’t it?

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