Born in downtown Glasgow 48 years ago, Niall Ferguson is a Senior Research Fellow of Jesus College, Oxford, Laurence A. Tisch Professor of History at Harvard, and a Senior Fellow of the Hoover Institution at Stanford, so he spends his time between the United Kingdom and the United States. His best selling books : ‘American Colossus’, ‘Empire’, ‘The Ascent of Money : a Financial History of the World’, ‘The War of the World’, in addition to a few other specialist titles, have earned him a reputation as an iconoclast and a brilliant, incisive and provocative mind bent on challenging with panache politically correct views in politics, economics and history. As a resident in the States and a long time observer of American society he contributes regularly to ongoing debates in newspapers and magazines.
Newsweek January 23, 2012 issue carries a feature which provides him with yet another occasion to rattle some cosy assumptions. Only the left worries about inequality in America, an increasing tendency in the wake of the ‘Occupy Wall Street’ movement. The standard liberal prescription of increased welfare spending, financed by higher taxes on the rich, is the logical answer. To make their point, liberals cite European countries like Denmark, Sweden and the Netherlands, where the rich have not been getting richer and social mobility remains high. Therefore, they conclude that what America needs is European-style policies of the kind listed by left- of- centre economist Paul Krugman in a recent column :” more nutritional aid for low-income mothers-to-be and young children… [improved] public schools… aid to low-income students… [and] a universal health care system.” The snag, however, is that that system is on the brink of fiscal collapse in its continent of origin.
‘Downton Abbey’ has come to downtown U.S.A.
Ferguson argues that true conservatives are not smug about inequality since they understand only too well that a capitalist economy must soon lose legitimacy if the benefits of economic growth flow only to a tiny élite. He believes the economic divide is real, acknowledging that the income of the bottom quarter of U.S. families has actually fallen since the 1970s, while it’s been an altogether different story for the rich. Quoting Berkeley economist Emmanuel Saez, he states that the share of total income going to the top 1 percent families has more than doubled since 1979, from below 10 percent to a peak of nearly 24 percent in 2007. The stark fact is that a poor kid in America now has about the same chance of becoming a rich grown-up as in socially rigid England.
Ferguson laments the fact that the Republican candidates for their party’s presidential nomination have hardly mentioned inequality in their recent debates, preferring to accuse President Obama of waging ‘class warfare’ whenever he brings it up. He brings into the picture Charles Murray of the American Enterprise Institute, whose new book ‘Coming Apart’ is the best available analysis of modern American inequality – and a much-needed antidote to the campaign for a European America. Besides, Ferguson appositely draws on a description of England in 1845 sketched by no other than the British novelist (and later Prime Minister) Benjamin Disraeli. There are “two nations, between whom there is no intercourse and no sympathy ; who are as ignorant of each other’s habits, thoughts and feelings, as if they were dwellers in different zones, or inhabitants of different planets ; who are formed by a different breeding, are fed by a different food, are ordered by different manners, and are not governed by the same laws… THE RICH AND THE POOR.” These words could equally well apply to the United States in 2012, comments Niall Ferguson.
Murray is no apologist for Wall Street. He considers scandalous the explosion in the value of the total compensation received by the chief executives of large corporations, and he pointedly asks if “the boards of directors of corporate America-and nonprofit America, and foundation America- [have] become cozy extended families, scratching each others’ backs, happily going along with a market that has become lucrative for all of them, taking advantage of their privileged positions-rigging the game, but within the law.” So far, there is not much here that OWS (Occupy Wall Street) protesters would disagree with. Yet Murray’s explanation for widening inequality – as we shall see later – is dissimilar to the liberal account of financial deregulation introduced by Reagan and the resulting rampant greed in finance.
Birds of the same feather…
Like Disraeli, Murray sees two nations where there used to be just one : a new upper class or “cognitive élite” and a new “lower class”. The first is made up of the top 5 percent of people in managerial occupations and the professions. The upper class has gotten rich mainly because the financial returns on brainpower have risen steeply since the 1960s. At the same time, élite universities like Harvard (where Murray studied and Ferguson teaches) have gotten better at attracting the smartest students. These students are very often the offspring of better-off families, which prompts Murray to observe that “the parents of the upper-middle class now produce a disproportionate number of the smartest children.” This happens because smart people tend to marry other smart people and produce smart children.
Members of the cognitive élite are educated together, then marry each other, and then proceed to work together and live in the same neighbourhoods, which Murray qualifies as the “SuperZips” (the 882 richest zip codes in America). The resulting class of “Overeducated Elitist Snobs”, especially the ones living in Beverly Hills, Santa Monica, Malibu, Manhattan and Boston, tend to be markedly more liberal than the national average. This is mainly because, thanks to a new segregation along class lines, they “have little direct experience with the lives of ordinary Americans.” Consequently, the victims of the cognitive élite’s effective secession from any broader notion of American society are the new lower class : the Americans with nothing more than a high-school diploma, if that.
We shall be in a better position to gauge the overall consequences of this chasm against the backdrop of the subprime mortgage crisis, the credit crunch and wider economic recession if we recall what Niall Ferguson himself wrote in 2008 : “… Booms and busts are products, at root, of our emotional volatility. But finance also exaggerates the differences between us, enriching the lucky and the smart, impoverishing the unlucky and not-so-smart… (The Ascent of Money, p. 13)