A Nobel prize-winning immigrant's view on American inequality
In October 2015, Princeton economist Angus Deaton got an early-morning call from Sweden that most scholars can only dream of. Groggy and bleary-eyed, Deaton learned that he had won the Nobel Prize in economics "for his analysis of consumption, poverty, and welfare."
For most award winners, the storm of media coverage following the Nobel announcement is unlike anything they'll ever experience. But, Deaton writes in a new book, the publicity about his award was quickly overshadowed "by an order of magnitude" when he published an academic paper a few weeks after his Nobel win.
The paper, which he co-authored with his wife, Anne Case, another distinguished economist at Princeton, was titled "Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century." Case and Deaton documented an astonishing fact: unlike virtually every other demographic group in America (and other rich countries), the death rate of white, middle-aged Americans was rising instead of falling. And that this macabre trend was being driven largely by a rise in what they would call "deaths of despair" — from suicides, drug overdoses, and alcohol abuse — especially in the population without a college degree.
Case and Deaton's findings hit American politics like an atomic bomb. When they both went to the White House as part of the traditional post-Nobel-award meet-and-greet with the president, President Obama immediately brought up the paper. "Deaths of despair" became a constant talking point in political speeches and debates. After Donald Trump won the presidential election, many commentators cited the paper as evidence that despair in white, working-class communities was a crucial reason why those voters helped put the firebrand president into office.
Deaton isn't necessarily the guy you'd expect to be such a prominent analyst of economic angst in America. Born in Scotland and educated at the University of Cambridge, he came to the United States in the early 1980s to teach at Princeton. In his new book, Economics in America: An Immigrant Economist Explores the Land of Inequality, Deaton recounts his journey to understanding the political and economic dysfunctions of his adopted home. It's sort of like Alexis De Tocqueville's classic Democracy in America, but with more numbers, more economics, and more vitriol.
A Biting Critique
When Deaton first came to America in 1983, he recalls being gobsmacked by how indifferent his fellow economists were to rising inequality, and how ideologically opposed they were to government intervention in the economy. Deaton, after all, had been educated at Cambridge, which was steeped in Keynesian economics (John Maynard Keynes had launched the Keyensian revolution, which provided an intellectual framework in favor of greater government intervention in the economy, while teaching there).
"I was appalled when one of my new colleagues (publicly) proclaimed that 'government is theft,'" Deaton writes. "I had grown up in a country where I, my parents, and our friends saw the government as benevolent, a friend in times of trouble, and I found it hard to believe that a distinguished academic could be so cynical and so libertarian. I still do not agree with his sentiment, but I have come to understand the extent to which state and federal government in the United States often work, not to protect ordinary people but to help rich predators make ordinary people poorer."
Rare for an economist, Deaton offers a lucid and unsparing critique of America's political system. From healthcare to taxation to poverty to regulations, Deaton sees a system that has increasingly served monopolistic corporations and the rich over ordinary citizens, allowing "a minority to prey on the majority."
"The United States has become a darker society since I arrived in 1983," Deaton writes. "The hopes of the immigrant have been tempered by reality, but even more by the corruption of the American economy and its politics, a corruption that threatens our democracy."
Deaton threads his book with eye-opening statistics to reinforce his argument that there is something terribly wrong with the current state of affairs in America. A sample:
- "Less well-educated Americans have seen little or no improvement in their material circumstances for more than fifty years. For men without a four-year college degree, median real wages have trended downward since 1970."
- "There are several million Americans — Black, white, and Hispanic — who live in households with per capita income of a few dollars a day and whose living standards are arguably as bad as or worse than those that the World Bank demarcates as destitute in India or Ethiopia."
- "The top 10 percent of incomes in the United States account for nearly half of all income, compared with only 14 percent for the bottom half of incomes."
- "Overall death rates in the United States have been rising, and, even before the pandemic, adult life expectancy has fallen for ten years for those without a four-year college degree."
Deaton (and Case) argue that the alarming rise in deaths of despair amongst non-college-educated Americans — which accounts for almost two-thirds of the adult population — is intimately related to their fading economic prospects. Deaton writes that "the decline of good jobs" is a crucial driver of despair. "This decline, in response to globalization and, more importantly, technical change (robots), is made much worse in the United States than elsewhere by the grotesquely exorbitant cost of healthcare," Deaton writes. "Beyond that, when bad things happen and people need help, the safety net in the United States is fragmentary compared with those in other rich countries."
In all this, Deaton sees economists as largely as complicit in the changes that have made life harder for millions of Americans. He argues that many (but not all) of the people in his profession have provided an intellectual legitimacy for a range of policies that have stripped away support for working-class Americans and forced them into an increasingly cutthroat labor market.
"They are apostles for the globalization and technical change that have enriched an elite and have redistributed income and wealth from labor to capital, all the while destroying millions of jobs, hollowing out communities, and worsening the lives of their occupants," Angus writes. "And when confronted with deaths of despair, they can blame the victims and those who try to help them."
Going forward, Deaton urges the economics profession to think more about "predistribution — the mechanisms that determine the distribution of income in the market itself, before taxes and transfers — and less about a redistribution that is not going to happen and is not what people want in any case." That, he stresses, will force many economists into "uncomfortable territory: promoting unions, place-based policies, immigration control, tariffs, job preservation, industrial policy, and the like. We need to promote a more realistic understanding of how governments and markets work. We need to abandon our sole fixation on money as a measure of human wellbeing."
To be fair to Deaton's chosen profession, he is not the only economist in America who is reconsidering traditional assumptions and policy recommendations. A growing number of people in his field are changing tack in light of emerging data, including the shocking statistics about the rise in deaths of despair documented by Case and Deaton.
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