Monday, April 23, 2012

Social Unravelling

Yves Smith:
This weekend, the National Journal published, “In Nothing We Trust,” using Muncie, Indiana to illustrate the distrust that is eating away at the American social fabric.

The institutions the story depicts as functioning well are the evangelical churches, which are downscale country clubs, and the local charter schools. The traditional churches are in decline, the public schools are falling behind, the City Council is discredited.

The article describes the result as a deserved or at least understandable loss of faith in institutions; the comments on the piece extol it as proof that government sucks.

But there is reason to think that the causality might run the other way: that trust and social bonds generally have weakened, and where that will show up most acutely is in institutions that have authority over us but over which we feel we have little sway. And this distrust, ironically, plays into the hands of the powerful, since people need to have enough faith in each other to be able to organize against vested interests to get their needs met. Napoleon was a big promoter of individualism, for he believed it made people easier to control.

For instance, the length of most contracts has gone up considerably. It wasn’t that long ago that a lot of routine business could be done on a handshake, with a letter agreement commemorating the arrangement (and then more to make sure that the two sides had heard each other correctly). The old saw is that a contract is only as good as the parties that enter into them. The common use of extremely detailed agreements reflects the fact that the parties to the agreement see the odds of litigation much higher than in the past and are spending more time papering up their agreements as protection against that event. In other words, they are going into business with people they don’t really trust to behave properly.

Another factor may be that many people see their relationships with institutions as less durable, and hence it’s easier to abandon them rather than try to fix them. In his book On Value and Values, Doug Smith described how our traditional relationships had been place-based, while now we relate to each other through markets, networks, workplaces and other organizations, and of course through friends and families. Place based relationships are durable whether you like it or not. And the fact that you will be dealing with the same people repeatedly gives everyone huge incentives to be pretty trustworthy and to work disputes out.

By contrast, our relationships to organizations are tenuous and elective. The relationship most of us want to be the most stable, that of employment, is fragile and typically short. The National Journal piece describes how people abandoned traditional churches for high service mega-churches and public schools for charter schools. The article thus takes the conventional view that the public no longer has faith in a whole long list of organizations, when in some cases, the decline of the organization is partly due to its some of its members withdrawing rather than pressuring it to shape up. And on top of that, since the Reagan era, government has been depicted in a negative light, which becomes a self fulfilling prophecy (fewer good people chose public service, budgets get cut which result in lower performance levels, justifying the negative views and paving the way for further funding reductions).
Timothy Noah:
Let me start by conceding a point that conservatives often make: Yes, a certain amount of income inequality is necessary in a capitalist system. You have to let the market reward effort and skill. But a system in which inequality of incomes constantly increases over time is worrisome.

Why is it necessary to reward so much more today than in 1979 the effort and skill (and dumb luck) that gets you into the top 1 percent of incomes (i.e., above about $350,000)? In 1979 the top 1 percent consumed about 10 percent of the nation’s collective income. In 2010 it consumed about 20 percent. (That includes capital gains.) Sure, the economy was in lousy shape in 1979. But the top 1 percent contented itself with 9-12 percent of the nation’s collective income for three decades prior to 1979, during the great post-World War II economic boom. Indeed, income share for the top 1 percent fell a little during that period. From the early 1930s through the late 1970s incomes in America didn’t become more unequal; they became more equal. So clearly the top earners can get by on much less without undermining capitalism.

I worry less about the 99 percent (which, let’s face it, includes a lot of pretty affluent people) than about the bottom 60 or 50 percent. Income earners at the median have not shared in America’s prosperity. They’ve actually seen their incomes go down (after inflation) during the past decade, and over the past three decades their increases seem pitiful compared both with people earning top incomes (and here I mean not just the top 1 percent but the top 10 and even 20 percent) and with people at the median during the postwar era. For a long time economists said: Wait until productivity rebounds. Then working families will get their share. But when productivity rebounded like crazy in the aughts, working families saw no reward.

What this means is that if you’re at the median you have no positive reason to care how the economy does. Your only motivation is fear—if the economy does really badly you may lose your job. But there’s no upside.

I think this situation has a lot to do with why there’s so much suspicion of institutions that knit the country together—Congress, the media, etc. Logically the suspicion should be directed at the rich, but nobody knows what Lloyd Blankfein looks like. Everybody knows what Barack Obama and John Boehner look like. So people rage against Washington, and government, and you get both the Tea Party and Occupy Wall Street. These groups are quite different in their political orientation, but both groups express contempt for democratic processes.
And has Jon Huntsman been reading this blog???

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